This seems to be a burning question lately with BP’s very well-publicized pipeline problems in Prudhoe Bay, Alaska which shut down a major source of U.S. oil production (on top of that, last year’s tragic refinery accident that killed 15 BP employees, created a perfect storm of BP problems and criticism). Clearly, when gas prices are affected, environmental strategy and practice is big news.
This week Fortune tackles the issue head on, asking “Can BP Bounce Back?“. Every interview I do turns at some point to whether BP is green or not. See, for example, Juliet Eilperin’s Washington Post article from August 9 (you may need to register on the site to see it) and my interview on Forbes.com.
It’s not surprising really — BP has been considered a real environmental leader over the last half decade. Our own ranking, based on data and expert opinion from before BP’s recent problems placed BP as number one on the international list of leaders we call “WaveRiders” (see our list in Green to Gold).
So two big questions remain.
1) Does BP have a “real” environmental program, and
2) Does the company have a maintenance and safety problem.
The two are linked, but the first is easier to answer.
Yes, it’s real. CEO John Browne came out in 1997 with his now famous statement about climate change being a legitimate global problem and pulled out of industry groups that fed money to those trying to debunk the science. He was far ahead of the curve, and he committed the company to cut greenhouse gas emissions in the 90’s, which they did ahead of schedule. I believe that the BP executives we spoke to believe in ‘it’s a start’ — they get that the era of oil dominance will wane, and they want to position the company for that and make a statement about beliefs. But of course it was also a publicity and marketing move — the two things are not mutually exclusive. And the campaign was a big success, enhancing the company’s brand value (see our book, p.137 for more details on measuring that success).
Now, the second question is not easy to answer, but if you read the Fortune article, a strong public opinion is emerging: yes, at BP safety has taken a back seat to operational goals. And as Joe Nocera also recently reported in The New York Times, the company’s culture may support cost-cutting and shortcuts. Fortune is even more blunt:
“BP’s internal culture was characterized by intense pressure to keep costs down, and budgeting often took precedence over routine maintenance and occasionally over safety.”
BP’s problems, tragically life and death in this case, are a prominent example of one of the reasons eco-initiatives fail (see Green to Gold, chapter 10), what we call “the middle-management squeeze.” Operational executives were given tough efficiency, cost, and throughput goals while also being told to go green. We single out BP in the book for this very problem. An anonymous exec in the Fortune article lays it out most clearly:
“The values are real, but they haven’t been aligned with our business practices in the field a scream at our level is, if anything, a whisper at their level.”
No matter what’s going on, the company should certainly be transparent about what it’s doing to fix the problem, take a hard look at its processes, and understand how diligently everyone is following their practices. The company seems to be taking this to heart, and Fortune reports BP will spend $1 billion to rebuild an improved Texas refinery and $550 million to improve 1,500 miles of pipes.
One big lesson for companies to heed from all of this is the following: not managing (or postponing) safety and environmental issues is not an option anymore. All big companies, especially those with big brands need to get these things right — and BP’s extensive ad campaign for years has created a big brand. The company has to take the good (brand value) with the ‘bad’ (more scrutiny and tougher questions). You get what you pay for.
