When a public pledge blows up in your face

PUBLISHED : Thursday, 24 June, 2010, 12:00am
UPDATED : Thursday, 24 June, 2010, 12:00am

In 2008, Hurricane Katrina devastated Florida, and also affected the oil rigs stationed in the Gulf of Mexico. BP's Thunder Horse platform was undamaged but oil production was significantly delayed as the crew struggled to right the platform. This may be a related reason why the company was in a rush to drill for more oil using the Deepwater Horizon unit in Louisiana. Errors in capping the pipelines led to the explosion, resulting in a tragic loss of life and the current spillage which BP is struggling to contain.

Corporate social responsibility is a buzz word for companies. A useful definition is that it is the means by which companies make their contribution towards a sustainable society. The new social responsibility standard, ISO 26000, is explicit in its explanation: 'The aim of social responsibility is to contribute to sustainable development ... an organisation's performance in relation to the society in which it operates and to its impact on the environment has become a critical part of measuring its overall performance and its ability to continue operating effectively.'

So how do companies demonstrate corporate social responsibility? They do so by establishing clear standards of behaviour in the way they treat and respect their staff and other stakeholders, as well as minimising the 'footprint' imposed on the environment by their business activities.

For companies exposed to the risk of damage to their reputation via their activities - a good example is the oil and gas sector - it is crucial to have management systems in place and, more critically, to pursue the values set up at the corporate level and not just pay lip service to them. A number of good companies take their social responsibility seriously. Most of them do not get mentioned in the media for doing so, which some may argue is the way such values should be practised - quietly and determinedly.

But when things go wrong, a company's public pledge for doing good can backfire horribly. BP used to be one of the most admired companies in the oil and gas industry and, not so long ago, its slogan 'Beyond Petroleum' trumpeted the progressive outlook it had adopted in venturing into renewable energy technologies. Sadly, events have gone awry. BP faces a clean-up bill of US$20 billion as well as the full wrath of the US government - but the cost to its reputation is more significant. Yet the company's intransigence in denying culpability during congressional inquiries is startling to say the least.

The point of this cautionary tale is not to single out BP, but to point out that this major company - like many other large multinationals - plays an important role in meeting our needs and providing jobs and opportunities for numerous people worldwide. But the execution of its business does not mean that the company has the latitude to cut costs and take unqualified risks to satisfy shareholder wishes. BP is learning the hard way and faces a long and painful admonishment.

Dr Thomas S.K. Tang is director of corporate sustainability at Aecom Asia