Harvard Case - Marathon Petroleum and Southwest Detroit: The Intersection of Community and Environment
"Marathon Petroleum and Southwest Detroit: The Intersection of Community and Environment" Harvard business case study is written by Andrew Hoffman. It deals with the challenges in the field of Strategy. The case study is 18 page(s) long and it was first published on : Mar 14, 2022
At Fern Fort University, we recommend Marathon Petroleum implement a comprehensive strategy that prioritizes environmental sustainability and fosters community engagement in Southwest Detroit. This strategy should be underpinned by a shared value approach, aligning the company's business goals with the community's needs and aspirations.
2. Background
This case study focuses on Marathon Petroleum's operations in Southwest Detroit, a predominantly low-income, minority community, and the challenges arising from the intersection of industrial activity and community well-being. The case highlights concerns regarding air and water pollution, health impacts, and a lack of community engagement in decision-making processes.
The main protagonists are Marathon Petroleum, a major oil refining company, and the residents of Southwest Detroit, who are directly affected by the company's operations.
3. Analysis of the Case Study
A. Strategic Analysis:
- Porter's Five Forces: The case reveals a complex industry landscape. The refining industry is characterized by high barriers to entry, intense competition, and significant supplier power. However, Marathon faces pressure from environmental regulations and growing public awareness of its environmental impact.
- SWOT Analysis:
- Strengths: Marathon possesses significant financial resources, industry expertise, and a strong brand.
- Weaknesses: Environmental concerns, lack of community trust, and potential reputational risks.
- Opportunities: Investment in cleaner technologies, community engagement initiatives, and sustainable practices.
- Threats: Stringent environmental regulations, public pressure for greater accountability, and potential for legal challenges.
- Value Chain Analysis: Marathon's value chain is heavily reliant on its refining process, which generates significant environmental impact. The case highlights the need to integrate sustainability considerations throughout the entire value chain, from raw material sourcing to product distribution.
B. Stakeholder Analysis:
- Key Stakeholders: Marathon needs to consider the interests of diverse stakeholders, including:
- Community members: Their health, well-being, and quality of life are directly affected by the company's operations.
- Employees: Their safety and job security are important considerations.
- Investors: They expect financial returns and responsible environmental practices.
- Government agencies: They regulate environmental standards and enforce compliance.
- NGOs and advocacy groups: They monitor and advocate for environmental and social justice.
C. Business Model Innovation:
- Shared Value Creation: Marathon can adopt a shared value approach, creating value for both the company and the community. This involves:
- Investing in clean technologies: Reducing emissions and pollution, thereby improving community health.
- Community engagement: Building trust and collaboration through transparent communication, community involvement in decision-making, and supporting local initiatives.
- Economic development: Creating job opportunities and supporting local businesses in Southwest Detroit.
4. Recommendations
Environmental Sustainability:
- Invest in cleaner technologies: Implement advanced emission control systems, invest in renewable energy sources, and explore alternative fuel options.
- Reduce water consumption and pollution: Implement water conservation measures and invest in wastewater treatment technologies.
- Adopt a circular economy approach: Reduce waste generation, recycle materials, and explore opportunities for resource recovery.
Community Engagement and Trust Building:
- Establish a community advisory board: Include diverse community representatives to provide input on environmental and social issues.
- Transparent communication: Regularly communicate with the community regarding operations, environmental performance, and mitigation measures.
- Invest in community initiatives: Support local schools, healthcare facilities, and community development programs.
- Create job opportunities for local residents: Prioritize hiring from the community and provide training programs to enhance local skills.
Corporate Governance and Accountability:
- Develop a comprehensive sustainability strategy: Integrate environmental and social considerations into the company's overall business strategy.
- Implement robust environmental monitoring and reporting: Regularly assess environmental performance and disclose data transparently.
- Establish a strong internal governance structure: Ensure accountability for environmental and social performance at all levels of the organization.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Marathon's core competencies in refining and logistics can be leveraged to drive innovation in cleaner technologies and sustainable practices. This aligns with the company's mission to be a responsible corporate citizen.
- External customers and internal clients: Meeting the needs of the community and building trust is essential for Marathon's long-term success. This includes ensuring the safety and well-being of employees and fostering positive relationships with stakeholders.
- Competitors: Marathon needs to stay ahead of the curve in terms of environmental performance and community engagement to maintain its competitive edge.
- Attractiveness ' quantitative measures: Implementing these recommendations will improve Marathon's environmental performance, reduce compliance costs, and enhance its brand reputation, ultimately contributing to long-term financial sustainability.
6. Conclusion
Marathon Petroleum has a unique opportunity to transform its operations in Southwest Detroit into a model of responsible industrial activity. By prioritizing environmental sustainability, fostering community engagement, and adopting a shared value approach, Marathon can create a win-win situation for both the company and the community. This will require significant investment, commitment, and ongoing dialogue with stakeholders. However, the potential benefits in terms of improved environmental performance, enhanced community relations, and long-term business sustainability are significant.
7. Discussion
- Alternatives: Other alternatives include simply focusing on compliance with existing regulations, relocating operations, or shutting down the refinery. However, these options fail to address the underlying issues of environmental impact and community concerns.
- Risks and Key Assumptions:
- Risk: Public resistance to proposed solutions.
- Assumption: The community is willing to engage in constructive dialogue and collaborate with Marathon.
- Risk: Cost of implementing new technologies and community initiatives.
- Assumption: Marathon is willing to invest in long-term solutions.
8. Next Steps
- Form a task force: Establish a cross-functional team to develop and implement the recommended strategy.
- Engage with the community: Conduct community meetings, surveys, and focus groups to gather input and build trust.
- Develop a comprehensive sustainability plan: Outline specific goals, timelines, and metrics for environmental performance.
- Pilot test new technologies: Implement pilot projects to demonstrate the feasibility and effectiveness of cleaner technologies.
- Monitor and evaluate progress: Regularly assess the impact of the strategy on the environment, the community, and the company's financial performance.
By taking these steps, Marathon can demonstrate its commitment to sustainability and community well-being, securing a more sustainable future for both the company and the residents of Southwest Detroit.
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Case Description
Environmental racism describes the unequal burden of environmental hazards placed on disadvantaged communities through systems, policies, and practices. In such a situation, these people disproportionately live close to sources of toxic waste-what are referred to as Locally Unwanted Land Uses (LULUs) such as sewage works, mines, landfills, power stations, major roads, and other emitters of airborne, earth, and water pollution-and suffer from greater rates of health problems, as a result. More than a quarter of Marathon Petroleum's 13 refineries are located in minority-majority communities. Marathon Petroleum's Detroit refinery is located in the ZIP code 48217, where around 80% of residents are Black, 12% are Hispanic, and over 40% are considered to be in poverty. These residents also have higher rates of asthma, heart diseases, and lung cancer than in most other ZIP codes in Michigan. This case places students in the role of fictional character Riley Novak, Marathon Petroleum's chief environmental officer, to examine the company's history with environmental racism, especially in Detroit, and the proposed solution-the Property Purchase Program.
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