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Five Lessons from the BP Oil Spill (Summary)

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#CSR #Environment #Risk Management
Andrew Winston, co-author of the best-seller “Green to Gold” advises some of the world’s biggest companies on environmental strategy. He published an influential article regarding lessons to learn from the BP oil spill in the Harvard Business Review’s blog. Please find below the summary of its top 5 lessons, covering many different stakes of the oil spill, from geopolitical and philosophical aspects to corporate level branding and strategy.

The BP {{LNK|Oil Spill|}} in the Gulf of Mexico has been referred to by Barack Obama’s Administration as the, “worst ecological disaster in American history”. ”The damage to the Gulf, its species and the people who depend on it is almost incalculable,” explains Andrew Winston in its article. He then adds: “BP has tried hard to downplay the scale of the tragedy and has moved slowly to stop the torrent”.

In this context, Winston asks himself, and its audience: what positive lessons can companies learn from that disaster? Here are the first 5 lessons he proposes…it’s up to you to find out more!

1. “Our reliance on old, fossil-fuel based technologies is devastating for this planet, for society, and for businesses”. Andrew Winston illustrates that the disaster is a direct result of an oil-oriented economy that we have chosen at some time, and the spill may be the wake up call to turn towards other renewable and non-fossil sources of energy.

2. “Preparing for a world where things only go right is extremely dangerous”. BP knows its business when it is moving in the right direction but not so much when things are wrong. The company invested a lot into exploration techniques, but much less in technologies to avoid spills or at least contain and clean them. Companies must always Be Prepared for the “worst scenario” that may occur within their activities. It’s simply called… risk-management!

3. “Downplaying your mistakes is, well, a big mistake!” Right after the oil spill, BP’s CEO, Tony Hayward, tried to minimize the consequences of the disaster and publicly announced that the spill was “relatively tiny compared to the very big ocean”. This inappropriate declaration shocked the public, who felt that the company was running away from its responsibility. As Winston says: “The amount of leakage that the CEO should accept from his operations is approximately zero”. Conclusion: never underestimate the consequences of your actions.

4. “Environmental risks can threaten the viability of a business”. Ecological disasters and environmental threats can destroy a company’s reputation, its business model and finally its viability. Andrew Winston explains: “As of today, BP has lost over a third of market value, worth about $70 billion.” His message explains that companies must take into account their environmental footprint and properly and regularly manage their QEHS risks.

5. “Companies can lose the reputation as a sustainability leader very fast.” BP has been famous for its environmental engagement for years. In 1990, the company even changed its name from “British Petroleum” to “Beyond Petroleum”, proving its commitment towards a more sustainable economy. Today, after 57 days of oil spill in the Gulf of Mexico, we have a perfect illustration of Warren Buffett’s famous quote:” It takes 20 years to build a reputation and 5 minutes to ruin it”.

In conclusion, the extra-precautions BP should have taken in order to prevent this disaster could have been expensive…even very expensive…but still cheaper than the” destruction of its reputation and business…not to mention an entire eco-system”. Before ignoring expensive protection measures, companies must ask themselves the price of their worth. Is this price smaller than their protection budget? Is it bigger? No doubt most of them would agree that thousands of dollars are not worth the risk of destroying their reputation and jeopardize their activities.

{{LNK|Read the entire article in Harvard Business Review|}} by Andrew Winston

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