British Petroleum Begins a New Era of Responsibility for NGOs

We all need and consume oil, and the myriad of products spawned from its ecosystem. We all share in the risk of exploiting it, some more directly than others. And then there are those neighborhoods (next to the refineries) that absorb more risk than others. And then there are the oil companies that take on the risk of exploitation, but in the case of BP we are learning about worst practices in risk management, governance and compliance, not best practices.

British Petroleum’s lack of governance and risk management combined with our own government’s absence of regulatory compliance and oversight marks the beginning of a new era.  In this new era governance, compliance and corporate social responsibility will be driven primarily by non government organizations that are the voice of the people. It has become brutally obvious that large trans-national corporations can’t govern themselves, and more importantly the collaboration between them and governments, (in this case the oil lobby) facilitates an environment of risk and recklessness in the management of natural resources.

After experiencing a near collapse of our financial system, we know now what a joke Sarbanes Oxley has become and that the government regulatory apparatus completely failed.

The hard truth is that our government is challenged to:

·         Manage our natural resources and fisheries

·         Manage our financial system

·         Manage our healthcare system

·         Manage and/or regulate the safety of our food supply

·         Manage or control our borders

British Petroleum is a trans-national corporation active in thirty countries with more than 22,000 service stations and sixteen refineries, and they upstream 2.3 million barrels of oil a day. BP reported 2009 revenues of $239 Billion, a profit of $14B so why can’t they manage their risk and govern themselves, they certainly have the resources?

BP’s Code of Conduct

“A fundamental BP commitment to comply with all applicable legal requirements and with high ethical standards”

I copied the code of conduct from their overly green and seemingly environment friendly website, but there is something about this statement that says who they are. Compliance with all legal requirements, hum what does that mean? Well it means that they will go only as far as the law of any country requires and not further. This is in essence is their problem; they need to go further than applicable legal requirements in the high risk and “high profit” business they run. Compliance with “high ethical standards” is about as vague as you can get and we know they vary with culture, country and company. So what BP is really saying is that we only go as far as we need to and we don’t go the extra mile because it might affect profitability and this is further reinforced by the following quote from their CEO Tony Hayward.

“We are responsible for our operations and we are accountable for setting and observing consistent and high standards within them. Our code of conduct, for example, provides clear expectations on behavior and compliance.”

I had a higher view of BP until the disaster in the gulf exposed their lack of governance and risk management. BP put up $500 million for a bio-fuels research center at the University of California at Berkeley and that is great, but now they have a PR and brand disaster of unprecedented magnitude on their hands. And in my view they have fueled the fire so to speak by setting up a live feed of the well leaking for weeks on end. Perhaps some good will emerge from this when all oil companies take a call to action and re-examine their risk management and governance across operations.

Enter the NGO

Non Government Organizations like the World Wildlife Fund and the Natural Resources Defense Council have now been put in a position of power and truly have the opportunity to be the voice of the people because government has failed. Those who oppose egalitarian groups and view them as zealots and extremists in some ways will rethink their role in world business. Like Exxon, BP will recover from this event and we can only hope they will live up to their responsibility in this terrible environmental disaster.  NGOs now have the power of social media at their disposal and we know that NGOs and many non- profit organizations are harnessing that power to gain influence and audience.

As a student of at the University of Massachusetts College of Food and Natural Resources I learned about the management of our planet’s resources and was taught that there are three principal approaches to managing natural resources:

·         Preservation

·         Conservation

·         Exploitation

 In the beginning many egalitarian groups advocated preservation of natural resources which was and is in direct conflict with the exploitation of our resources, the management approach still prevalent today driven by our capitalist system. This put NGOs at great odds with government and industry and their radicalism challenged many people including the scientific community. Times have certainly changed as NGOs now are important players in the global economy and can significantly impact brand reputation through their influence.

Conservation of natural resources employs management practices that enable the resource to be sustainably harvested and maintained for our children. This means that resources are not irreversibly damaged like our fisheries populations, many of which will never recover from over-harvesting and exploitation. In the case of oil, it is not a sustainable resource; there is only so much of it on our planet. That does not give license to energy harvesters to haphazardly manage operations and put other natural resources and industries at risk, such as fisheries and tourism. NGOs have a greater responsibility than ever in ensuring that large multi-nationals and governments are looking out for the best interest of their people. Join an NGO today and make your voice heard, your state senator, local representative and/or government may not be looking out for your best interest, unless of course you are in California where our governor  Arnold “just said no” to just drill baby and off shore drilling!

Further Reading: Why We Hate the Oil Companies, by John Hofmeister