Beyond petroleum: Why the CSR community collaborated in creating the BP oil disaster
The BP Gulf of Mexico disaster shows we have to move from reputation to reality, suggests Natalya Sverjensky.
The BP disaster has been the focus of much commentary in the CSR world for the past four months.
But two critical questions have yet to be answered: how did BP achieve its previous reputation as one of the world’s most responsible companies? And what does this reveal about the future of corporate social responsibility?
The impact of the oil spill on BP’s reputation, stock, and the future of the oil industry are all topics of debate which are being hotly debated in social media.
Many are focusing on the lessons marketers and CSR professionals can learn from BP’s PR gaffes during the spill.
Others go so far as to suggest that BP’s historically strong reputation is grounds for dismissing the oil spill as an ‘image crisis’ for the company, which will be repaired over time.
Both approaches are flawed and fail to address the underlying problems with CSR which brought us to the BP disaster.
Irresponsible behaviour
BP began the 1990s with an environmental distinction which would hardly earn it any CSR rewards today.
In 1991, according to US EPA data, it was the most polluting company in the United States. The company’s lack of attention to even the most basic forms of risk management and regulatory compliance continued throughout that decade and into the next.
Between 1997 and 1998 alone, for example, BP was responsible for 104 oil spills in the Arctic. And in 2008, BP received the largest fine in the history of the U.S. Chemical Safety and Hazard Investigation Board: $87 million for failing to correct safety hazards revealed in the 2005 Texas City explosion.
As of June 2010, BP has had 760 such OSHA fines for "egregious, wilful" safety violations. Meanwhile Exxon Mobil has had just one.
Under Tony Hayward’s leadership, the company backed away from its high-profile 'Beyond Petroleum' campaign, ostensibly a difficult move which reflected Hayward’s intention to refocus on delivering shareholder value.
This move was actually necessary from a business operations perspective—if only because BP quietly closed the doors of its much-hyped UK Alternative Energy headquarters in 2009.
Yes, the company was still making investment headlines otherwise, including a billion dollar commitment to second-generation cellulosic ethanol in Brazil. But not in the UK—the very market in which those public advertisements had been running.
So why was BP seen as a sustainability leader?
Illusions of responsibility
Despite the shift away from renewable energy and back to oil, the company earned awards and top placements on CSR and ethical indices and rankings right up to 2009 and into 2010.
BP was named #1 on Fortune and AccountAbility’s annual rankings of the world’s most responsible companies in 2007. Even after receiving the record OSHA fine, the company still ranked #9 on Fortune and AccountAbility’s 2008 list.
And even as recently as May 2010,determined long before the Deep-water Rig exploded—BP was named as a runner-up for the ‘Openness and Honesty’ reporting category at the Corporate Register’s 2010 CR Reporting Awards.
What are we to make of this contrast between a consistent record of ecological contamination, and a consistent reputation for leadership on corporate responsibility?
It’s a case study in how not to practice CSR. And it’s a timely example of just how hollow many of the central “benchmarks” of CSR have become.
BP, as many commentators have emphasised and as I’ve demonstrated above, regularly topped ethical rankings and indices. These exist to drive linkage between the financial, environmental and social priorities of corporations.
They are also meant to harness the competitive forces of the marketplace, using the rationale that if a company is consistently rewarded, it will generate pressure for increased responsibility across that company’s industry.
What we've got wrong
There are two fundamental issues with these indices, rankings and awards. The first is inconsistency. Consider the example of Monsanto, a similarly controversial company.
In the space of one month this year, Monsanto was placed at #581 (dead last) on Covalence’s annual ranking of the overall ethical performance of multinational corporations, and #31 on Corporate Responsibility Magazine’s 11th annual 100 Best Corporate Citizens list. Both indices were based on publicly available data and are reported on by media outside the CSR community,
The second issue is the actual effect of these rewards on companies and the industries they are a part of. They do indeed drive change—but most of these changes are incremental at best and all-talk-no-action at worst.
Placement on awards and rankings allows companies to keep up with their competitors and produce annual reports with shiny statistics and nice pictures. But they don’t bring us nearly as close as needed to building the low-carbon, sustainable economies of the future. To achieve that task, we need transformative innovation that goes beyond step-change improvements.
Many in the CSR community have discussed the disaster in the context of the oil industry at large. BP, they reason, was certainly ahead of its competitors in discussing the responsibility of an energy company to address climate change and invest in alternative energy.
But it’s critical to remember that being “best in class” when your industry’s core products and services are fundamentally unsustainable, is a total misnomer. There is no such thing as an ‘eco-friendly’ oil company.
The way forward
In the long-term, this disaster is not about BP. It’s about rethinking the future of corporate responsibility. Moving towards a sustainable future demands meaningful CSR.
So how can we fix the broken CSR industry? How can we transform ethical rankings, indices and awards into truly progressive mechanisms which will drive corporate social responsibility forwards?
Let’s start with the term ‘CSR’ itself. Like ‘sustainability’, it’s clearly lost a lot of its meaning and needs to be rethought—and possibly thrown out altogether. Continuing to frame corporate efforts on sustainable development as ‘CSR’ also keeps those efforts in the CSR department, instead of driving their integration into core business operations.
But what about ethical rankings and indices? If they actually worked well, they could have a significant impact on investment decisions. As Innovest concluded in its 2000 oil industry risk report—which ranked BP #2 out of the 13 oil companies on the S&P 500 for its “superior environmental management program”—investors could use the ranking as “a valuable indicator of future performance in the oil industry based on environmental criteria.”
Firstly, no oil company should be found on any of these ethical, CSR or sustainability-related lists.
And it shouldn’t require the biggest ecological disaster in American history, for example, to displace BP from the Dow Jones Sustainability Index.
Secondly, ranking and index criteria need to be made more visible and more robust. Yes, most tell us they are based on publicly available data. But most of them also rely on sourcing that data from corporate commitments—what companies say they are doing or plan to do.
Some are even based solely on information found in the CSR reports of those companies. All rankings and indices need to be driven by externally verified data from a solid variety of sources.
And what about marketing? The high-profile communications campaigns from the energy industry need to be automatically subject to greater scrutiny, and more robust regulation.
Shell’s new CSR campaign, “Let’s Go”, bears an uncanny resemblance to “Beyond Petroleum”, focusing on broad claims such as “Shell is helping to deliver cleaner-burning natural gas to more countries than any other energy company.”
The viewer of these ads is given no context for the claim—what other energy sources natural gas burns cleaner than, for example, or how delivering the gas to “more countries” is a relevant metric for sustainability leadership. This is unacceptable.
It’s time for an overhaul of the CSR industry. To borrow the words of one commentator describing the need to ‘fix BP’s reputation’ in the aftermath of the oil spill: “it must start this week”.
Natalya Sverjensky blogs on sustainability at http://ecogems.blogspot.com and is a consultant at Futerra Sustainability Communications. She is also co-creator of http://bpgulfcsr.com
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Big Oil is the dirty boot of an out of control sociopath committ
It is time to wake up and freak out. BP and the American government want you to sit tight and imagine that this environmental catastrophe is being fixed by responsible people. Don’t worry. Keep calm and carry on. Do not adjust your television. Go back to sleep. However, the truth is much more sinister.
http://ecohustler.co.uk/2010/05/16/big-oil-is-the-dirty-boot-of-an-out-o...
Shell's planned CSR in the Niger Delta
Yours is an interesting post about the faults of Beyond Petroleum and what we can learn from its failure at BP. I thought your readers might also appreciate an in-depth look at one of the great untold stories of oil and CSR - Shell in the Niger Delta. I've interrogated the veracity of Shell's planned CSR strategy in Nigeria here:
http://paulseaman.eu/2010/05/lets-interrogate-shells-csr-in-nigeria/
Thank you for this interesting article
Natalya -
I think you're raising a number of interesting points in your article. That a company with good CSR records ends up being responsible for such a disaster certainly is worth commenting.
I've twitted your article: http://twitter.com/HRightsBusiness
Re: Pariah business sectors
Hi Mallen,
Agreed that most oil companies probably know they need to do a lot more. However, I disagree with your assertion that they don’t know how to get there any better than we do. There’s an extraordinary number of solutions, both incremental and transformational, out there today which could make any energy company drastically more sustainable in the short term. This wasn’t true 20 years ago, but it’s certainly true now.
The key point I’m making is that none of the companies in the oil industry, as far as I can see, are making anywhere near the level of real and verifiable commitments to pursuing these solutions. And as BP has shown, this isn’t about setting ‘impossibly high standards’—it’s a question, firstly, of ensuring these companies follow even the most basic compliance measures.
On that note, as you accurately point out, businesses do indeed respond to incentives for achieving more responsible behaviours. But when you take into account the extremely lax regulatory oversight which played a key role in leading to the Deepwater Horizon disaster, as well as perennial problems with regulating these companies—why, for example, was Exxon Mobil able to evade federal income tax on its vast profits in 2009 amid an historic recession?—it becomes clear the task at hand is not providing more incentives. The first, most elementary task must be reforming regulation to ensure the oil industry is responsibly managing the serious environmental, social and economic risks posed by delivering its core products and services.
With regards to indices, I think you’re right that there’s a choice to be made between excluding certain industries, regardless of behaviour, or tightening criteria to effectively eliminate those industries indirectly. Either could be an effective approach. But let’s talk about criteria. The other side of the criteria is based on the idea that, because these indices are partially intended to send strong investment signals, and because investment is necessarily about driving change in the future, investments need to be directed towards renewable solutions, not towards traditional energy sources. This is why oil companies should be excluded. It’s not about writing them off, it’s about changing investment patterns under a rapidly tightening time frame to move towards a sustainable future.
Finally, your point that ‘no company-even the ethical niche brands-not even the NGOs-manages perfection’ is of course true. But if that’s the lens through which we examine corporate social responsibility—that because perfection is impossible, everyone gets treated equally, no matter what—what are we ultimately working towards? And, as in the case of BP, who are we rewarding?
The reason our profession—the CSR industry—is supposed to exist is to provide a critical perspective on what’s being done—and to help build effective paths forward. This potential to start a dialogue and deliver real solutions is why I work in the private sector, rather than at an NGO. You’re totally right that sustainability will not be achieved by ‘us’ the forces of goodness defeating some kind of ‘corporate evil’. But the reason I wrote this op-ed, and the reason I co-created bpgulfcsr.com, is to demonstrate that ‘us’, the CSR industry, are far from being the forces of goodness. There are many things that are essentially broken in how the CSR industry functions right now, and ethical indices are but one of them.
Thanks for a thoughtful analysis
Glad you brought Monsanto into the dialog. Like BP (which fooled me at one point), they've too often gotten a free pass. Their attitude about GMO seeds is particularly irksome (suing local farmers because some of their proprietary seed drifted over and took root, for instance.
The question of whether an oil company can ever be ethical is interesting. Similar arguments can be made about a whole host of industries (tobacco, weapons, etc.). It does bother me when I see a major weapons designer showing up on one of the "good" lists.
I just posted the link on my Green and Ethical Marketing Facebook page, http://www.facebook.com/greenandethicalmarketing.
Boxes do not help
I think that part of the problem is our fixation with attempting to grade or categorise companies as either good or bad. In my experience there's no such thing as a wholly good or bad company. Most do some good things and some bad things, and that includes all the oil and extractive companies. The key to successful CSR activist influence, I believe, is to identify and get behind the good practice while also criticising and doing all we can to get a company to ameliorate its bad practice - even if both the good and bad are being carried out by the same company at the same time
Re: Pariah business sectors
Hi Casper and Natalya
The question "do any companies actually behave like this" is an interesting one, but not actually relevant to the point of whether oil companies should be, by definition, excluded. Because on that logic, HOWEVER companies behave they are excluded. If the list is open, but no companies in that sector currently meet the criteria, that is a different matter. But that is not what you said.
Besides - I suspect we would disagree about what the criteria would be. If you set impossibly high ideals for companies and then dismiss everyone because they don't meet them, that is just playing with words.
Most oil companies do a number of things, including engaging with local communities, responding to human rights issues, investing in alternative energy solutions etc. Are any of them perfect? No, but no company - even the ethical niche brands - not even the NGOs - manages perfection. Do they need to do a lot more? Sure. Do they already know that? Probably most of them, yes. Do they know how to get there? No more than we do.
So if we assume that the people that work in the oil sector are not uniquely evil or stupid amongst all the people that work in business, then it is about how we set the frameworks for the type of sustainable energy companies we want to see (once we've actually worked that out). Businesses responds to incentives. If governments could agree that climate change is a priority and set incentives accordingly, that might help.
All I'm saying is that demonising the companies and writing them off as beyond the pale doesn't move us forward. Sustainability will not be achieved by 'us' the forces of goodness defeating 'them' the corporate forces of wretchedness. These are common problems - they will be common solutions or they won't be solutions.
the right indicies
Thanks for this article and subsequent comments.
I'm left wondering: then what ARE the correct / most accurate / most revealing / least subject to interpretation indicies which comanies can use and which will derive the same kind of results in various measurment tests.
and not just for oil companies. I work for a pan-african forestry company wherein social investment is a key part of the foundation of the company. But what should I be measuring in order to accurately reflect the impact of this social / environmental investment in a way that will stand the test of time and crisis?
KS
Such a disaster
Such a disaster isnt it. They fooled everyone and they are still doing it successfully.
Not quite so black and white...
I was happy to see Mallen's comment here. I don't think we should exclude oil companies from these lists either. This issue is not as black and white as that.
My concern lies with the move away from "CSR" language to sustainability. I am concerned about what that means for the "social" part of CSR. Sustainability means different things and is often associated with issues like the environment, climate change etc. If we move to using "sustainability" in place of CSR or even CR, then I would be concerned about the items that will fall away.
Thanks for the interesting article!
Helen
Re: Pariah business sectors
Hi Mallen,
You make a great point that oil will continue to be an unavoidable part of the energy mix in the short term. And yes, I do agree that, theoretically, it's possible to run an oil company in the 'most responsible' ways available--even if the core product remains unsustainable.
But there's two vital issues here. Firstly, do you know of any oil companies that are being run in this responsible way? I don't. In fact, the way oil companies like Shell have responded to the BP crisis--by distancing themselves and launching more ambiguous CSR ad campaigns--seems to me further evidence that these companies have no verifiable intention to move towards the type of truly responsible management you describe.
Secondly, the window of time in which renewable energy needs to be radically scaled up doesn't allow for us to give oil companies the benefit of the doubt that they will change. We have at best a few decades, at worst only one. They need to be removed from ethical indices once and for all to send investment signals that irresponsible behaviour has economic consequences--and that oil is not the energy of the future in the long term.
All the best,
Natalya
Okay, but...
@Mallen, you write - 'And there are choices to be made. You can run an oil company in a way that minimises risk, maximises progress towards sustainable alternatives, treats its people and the environment as well as can be achieved given the nature of the business. Respects human rights in countries with weak governance.'
Right, but do you know of any oil companies like that?
Pariah business sectors
Hi Natalya
We agree on a number of points here - not least that these indices should give predictive information, not just following the herd after the event.
However, I do disagree with your assertion that no oil companies should ever be included because it's a bad industry.
You use oil. Half of the things you depend on currently require it, and any progress we make to a sustainable future based on alternatives will be phased in - however fast we go.
And there are choices to be made. You can run an oil company in a way that minimises risk, maximises progress towards sustainable alternatives, treats its people and the environment as well as can be achieved given the nature of the business. Respects human rights in countries with weak governance. Or you can do none of those things.
If you say 'no oil companies ever' you effectively give the message that those companies are so bad by definition that they can despoil the planet however much they like, because they are already beyond the pale.
I want to see consistent signals sent to companies that we expect them to play the cards they have been dealt to the best benefit of society, whilst also making a profit for shareholders. If society needs a product (and at the moment, like it or not, we need oil) then you can't demonise companies for fulfilling that need - you can make it clear how you expect them to behave in fulfilling that need.
Best wishes - Mallen
Amen
Brilliant.