| p>The disaster in the Gulf of Mexico caused by the | | | | efforts and is giving BP a black eye. Oil and gas |
| rupture of one of British Petroleum's off-shore oil rigs | | | | exploration is a risky business, but if you would like to |
| has been front page news for some time now. The | | | | be seen as a "greener", more socially responsible |
| scope of the disaster is such that it is expected to | | | | energy company than your competition, perhaps you |
| surpass the Exxon Valdez disaster in Alaska in terms | | | | should be prepared to take more care mitigating |
| of the quantity of oil spilled. Hundreds of thousands | | | | those risks than the competition. Not only does BP |
| of barrels of oil have been spewed into the gulf as a | | | | seem to be more aggressive in the risks they take, |
| result of the rupture of their well with much more oil | | | | they also seem to be extremely unfortunate in |
| threatening to follow. The current attempt to cap | | | | terms of the results. Their employees especially |
| the spillage by sinking a dome over top of the | | | | seem to be at risk when BP tries to cut corners with |
| ruptured well has met with challenges in part because | | | | safety. Their record setting fine in Texas was not |
| they are working at a depth of 1500 metres and | | | | for the accidental explosion but for safety measures |
| must position the dome with robots and remote | | | | that they had violated. It is still not clear what caused |
| cameras. They have also been challenged by a build | | | | the Gulf accident but we can speculate that there |
| up of gases in the dome which prevent the siphoning | | | | was more than one cause and that one of the |
| off of the oil. | | | | causes was a failure of the equipment that should |
| The explosion that ripped the system of valves and | | | | have cut off the oil after the well exploded. |
| shutoffs from the head of the well was responsible | | | | The impression one gets from looking at the record |
| for the deaths of 11 of the workers on the platform | | | | of the company is of a Doctor Jekyll and Mister |
| at the time of the explosion. Things have gone | | | | Hyde. One arm of the company is focused on making |
| down-hill for BP since then. They have been criticized | | | | profits from their oil and gas exploration endeavours, |
| for the lack of immediate response to the disaster. | | | | whatever the costs while the other is focused on |
| BP claims that the owner of the drilling rig should bear | | | | green initiatives such as cutting their CO2 emissions |
| some of the responsibility - BP rents the platform | | | | and investing in alternate energy sources. They |
| from a company specializing in providing these | | | | appear to be successful in both areas, if you |
| platforms to companies like BP who use them to drill | | | | overlook their accident record for the moment. |
| for oil. They also claim that preventative action was | | | | Bringing the two sides together though, seems to be |
| hindered by their attempts to rescue the 11 workers. | | | | a challenge they aren't up to. Their investors don't |
| An attempt was made to discover the whereabouts | | | | know what to make of their efforts either. Their |
| of the 11 but they were never found. | | | | shares have not gained since 2000 while their |
| The human tragedy stands at 11 deaths but the full | | | | competitions share prices have soared with the |
| affect the spilled oil is having on the environment has | | | | increases in oil prices. |
| not been felt yet. The oil that is gushing from the | | | | When a speaker gives out conflicting messages - a |
| well is heading towards the mouth of the Mississippi | | | | verbal message saying one thing but body language |
| River where it will undoubtedly kill the marine wildlife | | | | delivering a different message, we say there is no |
| native to that area. The area affected by the spill is | | | | "congruence". This seems to be the case with BP. |
| a commercial fishing area for crab, shrimp, and | | | | Their CSR efforts are delivering one message but |
| oysters. Fleets of fishing boats in the Louisiana | | | | their safety track record is delivering another. One |
| coastal area have already been idled by the spill and | | | | almost gets the impression that CSR has no role to |
| the affect of the spill on the shell fish is unknown at | | | | play in the oil and gas exploration projects the |
| this point. | | | | company undertakes. If BP wants to recover from |
| This is not the first time that BP has found itself in | | | | this PR nightmare, they need to establish congruence |
| the news, being portrayed in an unfavourable light. In | | | | between their CSR message and their projects. Each |
| 2001 BP paid a $10M USD fine for violation of clean | | | | project needs to establish its own CSR goals and |
| air laws for pollution at 8 of its refineries. BP pledged | | | | objectives and these need to be prioritized against |
| to spend $500M USD on upgrades to its pollution | | | | the monetary goals and objectives of the project. |
| control methods. In 2005 an explosion at one of its | | | | Risks to these goals and objectives should be |
| Texas refineries killed 15 people. BP was fined $87M | | | | mitigated with vigour equal to the mitigation |
| USD by the U.S. Occupational Safety and Health | | | | strategies used for risks to profit related goals and |
| Administration, the largest fine of its kind up to that | | | | objectives. Establishing congruence between their |
| time. In 2006 their Prudhoe Bay operations were | | | | CSR policies and their projects may reduce the |
| found to have leaked more than 1 million litres of | | | | number and type of projects they undertake, but |
| crude oil due to corroded pipelines. The government | | | | should increase their credibility with the societies they |
| forced BP to replace 26 km of its pipelines to ensure | | | | do business in and eventually with their share holders. |
| that there would be no further leaks. | | | | BP may also want to take a page from the Risk |
| BP launched a massive CSR (Corporate Social | | | | Management playbook of the financial industry. This |
| Responsibility) campaign in 2000, spending over | | | | may sound strange in light of the recent debacle but |
| $200M USD in an attempt to rebrand itself as a | | | | the financial and insurance industries are proponents |
| socially responsible energy producer. They marked | | | | of Enterprise Risk Management (ERM) which places |
| the rebranding with a new tagline: Beyond Petroleum. | | | | responsibility for managing risk at both the board and |
| They made efforts to cut their CO2 emissions to | | | | management levels. The board is responsible for |
| back up their CSR public relationships efforts and by | | | | defining the risk "appetite" of the corporation which in |
| 2002 they had succeeded in reducing emissions to | | | | turn gives direction to management in terms of how |
| 10% below 1990 levels. This accomplishment actually | | | | to manage risk. Actually, the Committee of Steering |
| exceeded goals set forth by the Kyoto Protocol. | | | | Organizations (COSO) makes this definition a dual |
| They also invested in alternate energy sources and | | | | responsibility: the board and management must work |
| became the 3rd largest maker of solar panels in the | | | | together to arrive at a definition. It seems to me |
| world. | | | | that taking a similarly holistic view of CSR and risk |
| There seems to be a massive gap between the talk | | | | might benefit BP. Identifying CSR goals and |
| and the walk at BP. While their achievements in the | | | | objectives with each project and then defining the |
| area of CO2 reduction and alternate energy | | | | BP appetite for risks to those goals and objectives |
| development should not be discounted, their track | | | | would make their approach more congruent. |
| record with drilling safety counter-balances these | | | | |