The BP Oil Spill and Corporate Social Responsibility

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The BP Oil Spill and Corporate Social Responsibility

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Written by An Nguyen

Friday, 02 July 2010 00:00

Burning oil rig in the Gulf of Mexico. Photo courtesy of treehuger.com.

British Petroleum's oil spill in the Gulf of Mexico has many political pundits and business speculators observing how the U.S. government and the oil company will address such a massive environmental disaster. On April 20, 2010, an oil well owned by Transocean Ltd. and operated by BP exploded in the Gulf of Mexico. It is estimated that 800,000 litres (5,000 barrels) of crude continues to leak from the ocean floor into the gulf every day. Already, the accident has killed 11 workers. The explosion has had devastating effects for the environment, and tourism and local businesses have also suffered losses.

With so many wanting businesses to green their practices and critics ready to scrutinize corporations for their wrongdoings, it makes you wonder how BP and the U.S. government will act in the face of one of the largest oil rig explosions in American history. If past cases of corporate wrongdoings tell us anything, it's that cover-ups are reckless. Denying your culpability is dirty business.

You Still Have to Pay Your Dues

The economic downturn in the eighties taught businesses that cover-ups backed by a team of legal experts could buy you time, but you'd still have to pay your dues. After the 1984 Union Carbide gas leak in Bhopal, India, where an estimated 500,000 people died from poisoned gas attacks, a lengthy court case still led to a Supreme Court settlement where survivors were partially compensated for the family members' deaths. Similar courtroom battles have occurred in the mining and food industries, too, as government regulators fought hard against corporations to impose rigorous safety standards.

Government regulators fought hard against corporations to impose rigorous safety standards in the Tobacco industry. Photo courtesy of lawco.com.

A cluster of scandals demonstrated the government's role in bringing about good corporate citizenship: Merck's Vioxx, an arthritis drug the company knew was not safe, was linked to more than 27,000 heart attacks and sudden cardiac deaths before being recalled; the Bovine Spongiform Encephalopathy or mad cow disease crisis forced the beef industry to uphold higher standards for meat production, and health concerns influenced the Canadian government to pass a law requiring nutritional labelling on all pre-packaged foods. In the U.S., restaurants with 20 or more locations will have to provide nutritional information. In all these circumstances the government intervened to bring about social action for the greater good.

In addition, the turbulent resource wars of the nineties and into the present taught multilateral companies to be more aware of their behaviour abroad: De Beers had bought conflict diamonds from guerrilla movements and indirectly financed regional conflicts in multiple African countries and now guarantees conflict-free diamonds; Talisman Energy had indirectly invested in the Sudanese civil war efforts in 1998 and consequently sold off its conflicted investments.

With the environment a popular issue, corporations have now taken strong cues from their predecessors. Accepting responsibility is good PR, whereas denying responsibility is downright foolish.

BP's Smart Moves

Photo courtesy of cdn.wn.com

So far, BP has gone on record assuming responsibility for the oil spill. This statement has been coupled by the U.S. government's determination to rectify the problem. President Obama has informed BP Chairman Carl-Henric Svanberg "to set aside whatever resources are required to compensate the workers and business owners who have been harmed as a result of his company's recklessness." Addressing public concerns, Obama "described the growing spill as an assault on the shores and citizens of the Gulf region, [and] a national commission has been established to probe the cause of the disaster and recommend additional safety and environmental standards." In addition to the company already agreeing to a $20 billion fund to compensate people affected by the oil spill, BP CEO Tony Hayward has appeared to answer questions before a U.S. congressional committee. Though Tony Hayward's appearance has been characterized by many as damaging to BP's public image, the fact remains that the company has made inroads by admitting responsibility for the spill and has taken the first course of action to not only end the spill but also to investigate the matter further.

Put BP in Context

Media outlets may criticize BP for their failure in handling the crisis expeditiously and cutting corners to save on cost, but what company hasn't cut corners to save on business expenses? The measure of corporate accountability should also be analyzed in the context of other corporate behavior. Oil spills occur around the world. In many cases companies deny their involvement or reach a settlement out of court which barely compensates the victims. Exxon originally denied its guilt in the 1989 Exxon Valdez oil spill in Alaska and subsequent appealed a federal court decision for the to pay $2.5 billion in damages. Shell has also not been held accountable for the environmental destruction and political upheaval arising from oil leakages in the Niger Delta. Against this backdrop of corporate inaction within the oil industry, the public must realize that more is being done in the BP case than one would think.

On the surface, BP and the U.S. government seem to be working together in order to correct the situation. They realize that accepting responsibility and finding ways to restore order is the best approach. It has been reported that "the drilling of a relief well meant to staunch the gushing flow of oil is ahead of schedule and could be complete[d]" ahead of the predicted mid-August date. Until the relief effort is completed, it's natural for the public to want to see BP carrying out more corrective action.

Perhaps deflecting focus from the damaging oil issues to philanthropic endeavors like BP's continued support of the arts is a strategy the company could employ during this difficult time to earn points for good citizenship. Other high scorers can include restoring better leadership in the company, ensuring that higher quality control protocols are put in place to ensure better safety standards, as well as greater investments in rebuilding communities impacted by the spill. The list of activities BP can carry out to salvage their reputation is long. For now we can only hope that the public and government play their part in encouraging BP to go above and beyond to rectify the situation.

Years from now it won't be the back and forth political banter which local citizens will care about. They will have bigger concerns. Scientists project that approximately 1.5 million gallons of oil will spill into the coast, destroying local marine life and vegetation. Although President Obama has urged people to visit the coastal region, apprehensiveness about tourism looms large.

So what can we make of the BP fiasco relative to other corporate scandals?

Non-traditional coalitions, which stress the importance of corporate responsibility, can form in areas plagued by corporate inaction. And it's not just an uphill battle with civil society taking the lead. With an informed citizenry increasing expectations, the culture in which corporations manoeuvre themselves is ever changing. Businesses realize that public apologies, legal settlements, recalling products, establishing new standards, creating funds to compensate victims, and other philanthropic activities are ways in which they can prove that they're not just paying lip service to social responsibility. In weighing the short-term loses with potential profit to be made in the long term, corporations are now seeing that regaining public trust and restoring their reputation is a profitable investment. Putting all scepticism of altruistic acts aside, if these activities are the things that companies need to do in order to increase profits, then there is no other option but to follow through.

The good news is this shift has encouraged both left-wing and right-wing political opponents to team up on environmental issues that work to create public policy which meets the needs of environmentalists, the affected industries, citizens, and government. This increased awareness of offshore oil drilling sheds light on comparable oil spills occurring regularly in West Africa, a region where no one forces corporations to clean up their messes. Perhaps this incident will change corporate practices for the better in regions far removed from mainstream news outlets. In the face of growing intolerance for corporate misgivings, BP's current crisis suggests that partnerships are forming where we least expect them.

Reflections on Environmental Crises

Dreaming of a Cleaner, Greener Future: An Open Letter to all Members of Parliament

This article belongs to the Fire Issue.