BP Still Hasn't Learned Ethical Lessons
Verschoor, Curtis C., Strategic Finance
Readers of this column may recall my September 2007 column, "Is BP an Acronym for 'Big Polluter'?" It related the wide disconnect between the high environmental and social goals articulated by the company and the sorry performance concerning those aspects, at least in the United States. It described a horrific refinery fire in Texas, Alaska oil spills, and pollution from operations in U.S. refineries.
BP's website continues to set forth admirable corporate values, including responsibility: "We are committed to the safety and development of our people and the communities and societies in which we operate.We aim for no accidents, no harm to people, and no harm to the environment." The summary of the BP Code of Conduct notes that the Code is the "cornerstone" of BP's commitment to integrity and "summarizes our standards for the way we behave." Further, CEO Tony Hayward states, "The level of detail and practical approach [in our Code] signal our determination to embed our values and a culture of integrity more firmly in our group [company]."
The section of the Code that concerns health, safety, security, and the environment states, "We are committed to the protection of the natural environment, to the safety of the communities in which we operate, and to the health, safety and security of our people." In his introductory message to the Code, Hayward asserts, "The underlying philosophy of the Code is that there should be no gap between what we say and what we do." Tragically, that directive failed to be implemented on a massive scale in BP's operations in the Gulf of Mexico. BP's Deepwater Horizon drilling rig exploded and burned on April 21, 2010, killing 11 workers and inflicting environmental damage that may never be restored. BP's agreement to fund a $20 billion escrow account to pay for damages could turn out to be only a small down payment on the ultimate financial cost.
BP's website asserts that its operating management system (OMS) is "the cornerstone of our approach to achieving safe, reliable and responsible operations at every BP site." Hayward describes OMS as "the foundation for a responsible and high-performing BP. It has two purposes: to further reduce Health, Safety, Security, and Environmental risks in our operating activities and to continuously improve the quality of those operating activities." Unfortunately, this effort was only 80% accomplished at the end of 2009.
The BP Sustainability Review 2009 provides additional information on how BP utilizes its view of sustainability in its corporate strategy. Its definition of sustainability is: "the capacity to endure as a group [company] by renewing assets; creating and delivering better products and services that meet the evolving needs of society; attracting successive generations of employees, contributing to a sustainable environment; and retaining the trust and support of our customers, shareholders and the communities in which we operate."
Most of the Review report involves topics such as diverse and affordable energy, low-carbon energy, safe and responsible energy, people energy, and local energy. BP takes pride in being the energy company having the greatest commitment to climate-change issues. Its green, yellow, and white trademark is named Helios after the ancient Greek god of the sun and epitomizes its slogan "Beyond Petroleum."
The Review outlines how BP assures that its core value of responsibility is put into practice. Governance of the company includes standing board of directors committees such as the audit committee and the safety, ethics and environment assurance committee (SEEAC). SEEAC monitors nonfinancial risk, which includes regular reviews of information and reports from the safety and operations function. It also acts for the board in working with the Independent Expert (IE) to review the progress made in implementing the recommendations of the BP U.S. Refineries Independent Safety Review Panel, put in place in 2007 after the Texas City refinery disaster. …