The BP Gulf of Mexico disaster shows we have to move from reputation to reality, suggests Natalya Sverjensky.
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