Scenario: You are speaking for the executive board of a small oil company, Futur

Question

Scenario: You are speaking for the executive board of a small oil company, Future Fuel, in Colorado. Your CEO and founder, Tom Bennet, is very avid supporter of sustainability and innovation. He insists that money invested now will pay off in big dividends down the road. You all have a legitimate concern for the environment and share and support Bennet in his personal and business philosophy. You are all also very aware of the momentum of the growing “green” movement. Your R&D (research and development) budget for seeking new renewable and viable alternative sources of energy has traditionally been between 22-24% of your operations revenue. You have decided to increase that budget line item to 35% for the next fiscal year on the strong recommendation of Bennet. Additionally, you have also decided to equip your headquarters and other 8 sites in the west with active solar energy systems and wind power generators. You are a publicly held company and your stock has been less than stellar in its last 3 quarters’ performance. Your third quarter just ended, and you are about to hold your earnings meeting. Your earnings after operating costs are modest. You are announcing your numbers and your plans to increase the R&D budget and installation of renewable energy systems.

Discuss the above scenario as the executive board of Future Fuel and answer these questions.

This is not a speech. This is an academic essay, so please stay in third person.

If you use first person, do so sparingly and only when appropriate. Remember, using "this author" or "this writer," is not third person. Never use second person.

See http://owll.massey.ac.nz/academic-writing/1st-vs-3rd-person.php

What are you (as the Board) actually aiming to achieve? Why?

What return on investment does your activity/enterprise require? Is this a strategic driver in itself, or simply the means by which you maintain your activities in support of your goal(s) from question 1?

How do you (the Board) balance the needs of the shareholders and the need to innovate?

Explanation / Answer

The board is aiming to address the sustainability challenge and environmental issues, which have a long term impact on their business. Therefore the board is aiming to reduce company’s own and its business’s dependence on non-renewable sources of energy, by focusing on new renewable, viable and sustainable sources of energy. The board understands that continuing exploitation of non-renewable conventional resources will only last as long as the resources last. The company has to look for long term solutions and therefore invest now in the innovation and technology from long term future perspective. The enterprise requires return on investment, which is more than the combined cost of debt and equity. Return on Investment is not a strategic driver. Strategic driver is the long term direction and its focus on innovation and technology to make its business future ready, when the environmental issues and scarcity of resources will make the existing conventional resources unviable in future. By investing in technology and innovation from a future perspective, board is creating business model for the enterprise for long term, which will give sustainable competitive advantage over other players and the company will reap the benefits in times to come. Therefore the company needs to innovate and invest in R&D to provide better and sustainable returns to its investors and shareholders and contribute to environment and community by providing clean and viable energy alternatives.

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