07 June 2010

big oil and CSR

Big Oil and CSR are about as compatible as chalk and cheese. Having said that it must not be forgotten that one of the pioneers of employing CSR was oil megamoth, Shell. Shell's sustainability reputation now remain in tatters and that is a testament to how much companies can get by with green-washing the public.

Operating in one of the most polluting businesses requires there to be certain environmental and social boundaries. The BP disaster is a proof to this fact - it provides not just environmental problems of massive proportions but also makes an interesting case study from a CSR point of view. CSR is not public relations but public relations is CSR. This is the point of balance on which BP dances as it strives to hang onto whatever little reputation is has. Industry analysts predict that due to rapidly dropping BP shares, it will be easier for another company to buy out the British petroleum giant. After over a hundred years in the business with various controversies, it is hard to imagine that the company will cease to exist if it does not recover.

The clean up operation is said to cost the company anywhere between $20-25bn. Its overall revenue is in the range of $120bn which has now dropped to $80bn. For a giant corporation to pay out $20bn in clean-up charges is no big deal. It is a certain bad luck that the spill occurred off the coast of United States and affected American fishermen. If the same spill of the same magnitude had happened, say off the coast of Africa, the pay out charges would have been far less and any environmental impact could have been swept clean under the carpet.

Consider this: BP's CSR campaign has a budget of $125 million which is not even 10% of their annual revenue. BP is a classic example of 'green-washing' where it has positioned itself to be seriously investing in alternative energy sources etc, but in fact their main revenue source is from petroleum. Throughout their years in operation, BP has been hit by CSR disasters:

  • An explosion at a Texas City refinery in March 2005 killed 15 workers
  • Price fixing in the propane gas market in 2007
  • Corrosion in the Alaskan pipeline which caused a leak and shut down production in Prudhoe Bay, Alaska in August 2006

Big Oil is in desperate need of CSR reform. The mistake that most oil companies make is to get CSR hopelessly muddled up with 're-branding' and then continue business as usual. To put a new face on the oil industry, there needs to be far-reaching consistent action in operations at every level apart from investment in alternate energy sources.

Currently the industry faces a severe lack of sustainability innovation and have fallen into the trap of talking more rather than doing more. There is not a single company that is serious about CSR even though they operate in one of the most harmful businesses. This is simply because there is not enough regulation. There is also increasing demand for petroleum products - these facts are something that Big Oil takes complete advantage of. Plus, they have infinite financial resources to pay their way through any situation.

Big Oil CSR is sleazy and non-quantifiable. However after the worst oil-spill in the world, it is a shame if it has to remain that way.

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