Lessons for the CSR Industry from the Deepwater Horizon Spill

Lessons for the CSR Industry from the Deepwater Horizon Spill

Prior to the Deepwater Horizon accident, BP was among the recognized leaders in sustainability reporting. A long-time "A+" reporter against the Global Reporting Initiative (GRI), BP has been listed by DJSI, FTSE4Good, has won numerous sustainability-related awards around the globe and regularly topped sustainability assessments, such as the Tomorrow's Value Rating.

Around the millennium, BP pioneered the oil and gas sector through its "Beyond Petroleum" communications platform anchored by public commitments to alternate energy development, community engagement and development and robust management systems for social and environmental protection. In short, BP has been a long-standing leader in the development of the "nuts and bolts" for a strong sustainability program.

Although the Deepwater Horizon incident is not unique (similar and worse examples of oil spills and other unsustainable practices abound) and, although BP's response can be argued to be better than similar instances in the past, the accident in the Gulf highlights the gap between messaging, perception and reality for the CSR industry.

For example, it appears that BP and its suppliers were cutting corners with regard to health and safety, but the BP Sustainability Report (and all of the other oil and gas majors) claim to have robust health and safety controls through the group-wide operating management systems. Similarly, it appears that the oil and gas companies have had inappropriate relationships with regulators in the U.S. Minerals Management Service, but these relationships are counter to the principles explicitly stated in each company's Code of Conduct.

We CSR practitioners should be asking ourselves some important questions in light of these conflicting results:

  1. Does the fact that a good CSR practitioner can have such an egregious error suggest a fundamental failure of CSR -- that governments should be the only arbiter of environmental and social responsibility, and companies should be held accountable only to government expectations?
  2. Can society (or investors) trust the material in sustainability reports -- for BP, the oil and gas sector, or any other company?
  3. Did we (the CSR analysts and practitioners) miss the boat and become swayed by these corporate sustainability reports?

To the first, I do not believe that this is a fundamental failure of CSR. To achieve real solutions to today's issues will require multilateral thinking and participation -- from companies, communities, governments, advocacy groups and researchers.

Businesses must accept that in many cases the enterprise must surpass regulations and political priorities to drive best practice. So long as businesses gain economic benefit from activities, society can hold them to account for the impacts those activities cause beyond the prescriptions of regulation.

The alternative, relying entirely on government to control industry, ignores the inherent political biases of lawmakers and the fact that government agencies are frequently bound by the same competing priorities of revenue (allowing business activities to generate taxes, fees, etc) vs. protective behavior (denying business activities in the interest of social and environmental good).

To the second question, there are some important lessons to be learned before sustainability reports can be trusted or used to make accurate assessments of a company's practices and performance.

Lesson 1: CSR practitioners and "experts" must update and validate our methodologies for assessing corporate CSR claims.

It has never been sufficient to judge a company based on the "quality of the report." We should be relying on criteria that "look through the window" of reporting to the underlying systems and performance for the company in order to make an informed judgment.

Lesson 2: Businesses must get better at identifying material issues.

Currently, many companies rely on universal reporting frameworks like the GRI to define the possible list of environmental and social issues that might be significant to the business or its stakeholders. More advanced reporters still, by and large, rely on perceptions of importance driven directly or indirectly from media coverage to determine which issues should be managed and communicated. Neither of these methods could possibly have identified the problems that led to the Deepwater Horizon explosion and subsequent oil spill.

Lesson 3: There has to be a much greater commitment by industry to assurance (third party audits) of CSR reports.

Not just any assurance, but smart assurance. For example, checking the accuracy of the data and claims in the BP report would not have identified problems in the relationships with regulators or the possible cutting of corners at the operational level. To have any chance of identifying these types of problems, assurance must be undertaken against broader stakeholder principles such as those in the AA1000AS. We should also recognize that assurance is only one step and not a panacea -- the BP Sustainability Report was assured against the AA1000AS.

The onus is on the CSR "experts" and companies to preserve sustainability reporting as a meaningful form of communication. Experts must get smarter about how to assess reports and provide informed opinions on whether the companies are living up to the rhetoric in the reports. Companies must help by driving towards better balance and committing to external checking and assurance.

Without these efforts, we can expect that CSR and sustainability reports will become increasingly about public relations and useless for making investment or ethical decisions.

Todd Cort, P.E., Ph.D., is CEO of Two Tomorrows (North America) and author of the Tomorrow's Value Rating for the Oil and Gas Sector. Two Tomorrows is a global sustainability consulting firm with services in communication, strategy development and implementation, training and assurance. On October 18-22 the company will be holding a five-day training course in its San Francisco offices -- the only CSR training certified to IRCA standards in the U.S. For more information, contact todd.co[email protected], (415) 362-3630, www.twotomorrows.com.

Photo CC-licensed by DeepwaterHorizonResponse.

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