BP and Corporate Social Responsibility

I’ve long been critical of the term “CSR” — Corporate Social Responsibility. (See for example my series of blog postings culminating in my claim that “CSR is Not C-S-R”.) Too many people use the term “CSR” when they actually want to talk about basic business ethics issues like honesty or product safety or workplace health and safety — things that are not, in any clear way at least, matters of a company’s social responsibilities.

But the BP oil spill raises genuine CSR questions — it’s very much a question of corporate, social, responsibility.

BP is in the business of finding oil, refining it, and selling the gas (and propane, etc.) that results. In the course of doing business, BP interacts with a huge range of individuals and organizations, and those interactions bring with them ethical obligations. Basic ethical obligations in such a business would include things like:

a) providing customers with the product they’re expecting (rather than one adulterated with water, for example),
b) dealing honestly with suppliers,
c) ensuring reasonable levels of workplace health and safety,
d) making an honest effort to build long-term share value,
e) complying with environmental laws and industry best practices, and so on.

Most of those obligations are obligations to identifiable individuals (customers, employees, shareholders, etc.). There’s nothing really “social” about those obligations (with the possible exception of compliance with law, which might better be categorized as an obligation of corporate citizenship, or more directly an environmental obligation). And it’s entirely possible that BP, in the weeks leading up to the spill, met most of those ethical obligations. The exception, of course, is workplace health and safety — 11 workers were killed in the Deepwater Horizon blowout. But even had no one been killed or even hurt during the blowout, a question of social responsibility would remain.

So, what makes the oil spill a matter of social responsibility? Precisely the fact that the risks (and eventual negative impacts) of BP’s deep-water drilling operations are borne by society at large. The spill has resulted in enormous negative externalities — negative effects on people who weren’t involved economically with BP, and who didn’t consent (at least not directly) to bear the risks of the company’s operations.

Now, all (yes all) production processes involve externalities. All businesses emit some pollution (directly or indirectly via the things they consume) and impose some risks on non-consenting third parties. So the question of CSR has to do with the extent to which a company is responsible for those effects, and (maybe) the extent to which companies have an obligation not just to avoid social harms (or risks) but to contribute socially (beyond making a product people value). From a CSR point of view, then, the question with regard to BP is whether the risks taken were reasonable. Most of us would say “no.” But then most of us still want plentiful cheap gas.

Thus the BP oil spill provides an excellent way to illustrate the way we should understand the scope of the term “corporate social responsibility,” and how to keep that term narrow enough for it to retain some real meaning.

———-
p.s., here are a few relevant bits of reading:

1) Did you know that, in 2005, BP made it onto the Global 100 list of the “Most Sustainable Companies in the World”, a feat the company repeated in 2006. (And yes, that’s a reason to be skeptical about such rankings!)

2) See also this bit on Which is the Most Ethical Oil Company?

3) And finally here is BP’s own take on CSR, from 2002, see this speech: The boundaries of corporate social responsibility
———-
Addendum:
Here are a few books on ethics & CSR in the oil industry. No endorsement is implied.

11 comments so far

  1. Julian Friedland on

    I’m not sure I agree with your claim that all business creates externalities, that is, costs of doing business borne out by a third party. Correct me if I’m missing something here:

    You say for example that all businesses create pollution via things they consume. I don’t follow what you mean here. How does consumption automatically pollute? Waste can be recycled naturally, indeed nourishingly, through the environment. At that point, it is no longer waste but natural capital. This is the way natural processes work and why, for example, wild animal scat is not so much a pollutant as food and fertilizer.

    In much this same way, don’t myriad businesses use purchased or other internalized offsets that allow them to run sustainably?

    Biodynamic farming for example recycles all its waste. Thus, any C02 that the composting and farming produces is offset by the C02 that is later recollected by the next crop.

    • Chris MacDonald on

      Julian:

      Good question.
      It’s only very recently that it’s been even conceivable for companies to claim zero pollution (through carbon offsetting, etc.) though I’d have to see a detailed accounting to believe it. (Yes, things can be recycled, but no recycling is 100% efficient.) If there are any companies that produce zero environmental externalities, I’d love to see it, but if they exist they’d be the exception that proves the rule.

      But there are other kinds of externalities, too. Most businesses make noise, add to traffic congestion, internet congestion, etc., all of which impose costs & risks on others.

      Chris.

  2. [...] Walmart is headquartered? Is anyone calling for a boycott of the U.K.? After all that’s where BP is [...]

  3. [...] BP and Corporate Social Responsibility [...]

  4. [...] #1. BP and Corporate Social Responsibility. This entry used the BP oil spill as an example to illustrate what I take to be the proper scope of the term “CSR” — i.e., something considerably more narrow than most people take its scope to be. [...]

  5. [...] a list of hated companies”) has of course appeared here several times this year, including in “BP and Corporate Social Responsibility”, and “Boycotting BP is Futile and Unethical”, and “Ethics, BP, & [...]

  6. [...] ethical issue into the relatively narrow notion of corporate social responsibility. But like the BP oil spill, the current case raises issues that are genuinely social in nature. As difficult as it may be, set [...]

  7. [...] The nuclear crisis. Although their role has not been front-and-centre (unlike, for example, the BP oil spill), at least a couple of companies have played a significant role in the crisis at the Fukushima I [...]

  8. Ify on

    Please can someone help to explain to me to what extent does BP fulfil its corporate social responsibilities? Thank you.

  9. [...] is the question Chris MacDonald raised in his blog “BP and Social Corporate Responsibility” He comments that all business processes imply externalities and that all businesses emit directly [...]

  10. David Taylor on

    Thank you soo much for this good read and the references provided at the bottom of your article. These will prove to be valuable resources as I create a case study on BP & Corporate Social Responsibility.


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