BP: A cautious beginning in environmental reporting

BP recently set itself the goal of becoming a business leader in environmental standards, and one of its latest initiatives was a first public report on its environmental performance. The review falls short of the best examples of corporate reporting on the environment on several counts, but BP is holding consultative meetings with interest groups with a view to improving the next time round.

Over the next few years, public access to information on companies' environmental performance will be extended considerably by law - notably several sections of the Environmental Protection Act 1990 and the 1990 EC Directive on public access to environmental information held by official bodies. But the momentum towards wider disclosure is also coming from a number of voluntary initiatives.

Voluntary disclosure
Among these are the forthcoming EC Regulation on eco-auditing and the British Standard on environmental management systems, the CBI's new Environmental Business Forum, and the chemical industry's "responsible care" programme.

For the moment, however, there are very few case studies of good corporate practice in external reporting of environmental performance for companies to draw on - and where these do exist they come mostly from non-UK businesses.

One worthwhile example is that of Norsk Hydro, the Norwegian chemicals and metals group which published what seemed to be a frank account of its environmental problems in Norway - and was sensible enough to support it with both quantitative data and plans for cleaning up its problem sites (ENDS Report 185, pp 13-15).

More recently, the US chemical company Monsanto issued its first annual environmental review. A notable feature of the report was an annex of quantitative data on releases of pollutants and wastes from all the group's facilities world-wide - and an accompanying invitation to interested parties to contact its headquarters for more specific figures. The report also set out Monsanto's forward plans to 1995 for reducing its releases - and mentioned some problem areas, such as landfill and groundwater clean-ups in the USA, about which it would doubtless have been reminded by environmental groups had they been omitted (ENDS Report 200, pp 8-9).

The lack of many other good examples in this field means that the field is wide open for companies to make a name for themselves by taking an open or innovative approach to disclosure of their environmental performance.

Leadership aspiration
At the end of 1990, BP announced that it was pushing the environment higher up its scale of priorities by adopting a revised policy committing the group to "strive to be an industry leader" in environmental standards. This was surely fitting. BP is the UK's biggest company, the second largest in Europe, and the third largest oil company in the world.

On the environmental front, BP can reasonably claim to have been a pioneer in many management practices which are now commonplace among responsible businesses. It conducted its first environmental impact assessment in 1971. The project concerned was the Forties oilfield in the North Sea, and in 1982 the company followed up by conducting an environmental audit of the development (ENDS Report 85, pp 9-11) - one of the first exercises of its kind.

These early initiatives, and others, were subsequently codified into an environmental protection programme which won BP an international award for corporate environmental achievement in 1988 (ENDS Report 161, pp 11-13).

The revised health, safety and environmental (HSE) policy adopted by BP in 1990 builds on these achievements. It is to be implemented by a strategy with seven key elements. These are safety and loss management, emergency response and crisis management, health promotion, product stewardship, pollution prevention, energy conservation, and community relations.

Evidence that the revised policy is already making a significant impact can be found in the environmental improvement programme which is being developed at BP Chemicals' site near Hull. This includes a new drive to quantify the site's releases to the environment and identify waste reduction opportunities, quality targets for liquid discharges to be achieved by 1995, improved off-site air quality monitoring, and a concerted local communications programme (ENDS Report 198, pp 21-4).

Advisory committee
Another recent initiative was the establishment of a high-level HSE Advisory Committee outside the management structure in this area which advises and assures the main BP board on the group's performance. The Committee comprises four non-executive directors, and has the power to commission safety and environmental audits and interview chief executives and plant managers directly.

BP's Chairman, Bob Horton, has also signalled the new importance attached by top management to environmental protection by instituting an annual Chairman's award to recognise outstanding achievements by individual employees. The scheme attracted more than 300 entries in 1991. The winner was an employee at BP Oil's refinery in Lavera, France, who introduced daily water and effluent monitoring arrangements. The plant's employees receive profit-sharing payments if the effluent quality beats index targets.

Missed opportunity
Late in 1991, BP took its first step in reporting externally on its environmental performance in a 1991 review titled "New Horizons." It has to be said, however, that if there is an opportunity for companies to establish themselves as pioneers in accounting in public for their environmental record, then BP has not seized it the first time round.

The review is a liberally illustrated, 28-page document which first explains the group's HSE policies and then gives a 400-500 word account of its practices, accomplishments and intentions in each of the seven priority areas identified in BP's forward HSE strategy. Penetrating insights into its practices and performance are clearly not on offer.

Some of the criticisms which can be levelled at the document are as follows:

  • The health and safety and environmental protection functions within BP were brought within one command last year, and the review is written from this internal perspective that HSE is best managed in an integrated way. However, this does not necessarily fit with the priorities of outside audiences, whose principal interest is in disclosure of environmental performance. This is a relevant consideration to the extent that reporting on health and safety matters squeezes fuller accounts of environmental performance out of the review.

  • The review takes a conventional and hence constrained perspective of what comes under the umbrella of corporate environmental performance, focussing on issues such as energy conservation, waste minimisation and pollution control at production site level. Global warming is touched on in just a single paragraph, and one would be hard put to believe that BP is a major supplier of fossil fuels in a world increasingly concerned about the greenhouse effect. In particular, the review reveals nothing of how it intends to respond to this issue in business terms, in either the short or long term.

    Likewise, the review says next to nothing about environmental impacts arising from the supply and use of BP's products - even those under its direct control. One example is the distribution and sale of petrol, during which volatile organic compounds are emitted to atmosphere unless the facilities concerned are fitted with vapour recovery equipment. Another is the sulphur content of its oil products. These are not trivial issues, either in environmental terms or in commercial terms for BP.

    In both these cases, it would not be difficult to devise a simple indicator of BP's current performance and future intentions. One possibility would be to state how many of its petrol distribution terminals and 19,000 service stations are presently equipped with vapour recovery units, and how these numbers are expected to change in the coming years.

  • The review's section on product stewardship also takes a conventional perspective, with the issues being seen in terms of assuring that BP's products can be supplied and used safely and advising customers on safe use and disposal practices.

    But the review says nothing about up-and-coming environmental issues in product management, such as the role of life-cycle analysis or BP's responsibilities in closing the product loop. Products for which BP could play a role in establishing recovery and recycling arrangements include motor oils, solvents, plastics and product containers, and in the latter two cases it has recently taken the first steps to do so. However, nothing is said in the review about its philosophy or goals in this area.

    There is also the question of how far BP is prepared to take the concept of product stewardship. One product with which this arises is the new bitumen-based fuel, Orimulsion, which is being marketed to European and US electricity generating businesses by BP Bitor, a joint venture with the Venezuelan state oil company.

    Orimulsion is controversial partly because of its relatively high sulphur content, and Bitor claims that it is seeking - partly by means of appropriate pricing - to encourage generators to burn it only if they are prepared to install desulphurisation equipment. Its efforts, however, have made no noticeable impact on National Power and PowerGen, both of which have plans to burn the fuel in power stations without desulphurisation units. Bitor may well retort that it ultimately has no control over their decisions, but this argument will not wash with environmentalists who will make it their business to stir up adverse publicity for BP's image as a whole over the issue.

  • Perhaps the most conspicuous shortcoming of the review is that it is virtually bereft of quantitative data. This makes it impossible for anyone to know where BP's environmental performance was five or ten years ago, where it is now, and where the group hopes to take itself five or ten years hence. Certainly there is no basis for the reader to assess the assertion made in an introduction to the review by James Ross, BP's Managing Director for HSE, that it reveals that BP's "performance is pretty good - but not yet sufficiently consistent."

    That is not to say that every aspect of a firm's environmental performance can be boiled down into figures. For example, waste generation at an oil or gas production well in a tropical rainforest will probably pale in significance alongside the direct impacts caused by the associated pipeline or other transportation arrangements as well as any secondary impacts, such as colonisation of the forest along a new access route to the well.

    Mr Ross's introduction does acknowledge that the presentation of quantitative data is a topic for debate. "Report too little," he says, "and we convey a rather simplistic picture. Report too much and we spend too much of our time gathering data, and not enough improving our performance."

    However, one of the most important lessons learned in the early stages of the new environmental improvement programme at BP Chemicals' site in Hull, and many others like it, is that only when data-gathering is treated seriously do cost-saving opportunities for waste minimisation and pollution prevention come into view. Until every BP business has taken the same route to quantification - and there has been no instruction yet from headquarters that they should - the company will not only be vulnerable to criticism that it is asking the outside world to take too much on trust, but will also be short of the data needed for its own purposes.

    Right-to-know problems
    One of the reasons why BP may be sensitive to disclosing too many statistics is hinted at in the review. Under right-to-know legislation enacted in the USA in the wake of the Bhopal disaster, releases from BP America's sites have to be notified to the Environmental Protection Agency, which publishes the data in an annual toxics release inventory. Environmental and community groups have used the data to press BP to curb its emissions and discharges.

    According to the review, "BP supports the public's 'right-to-know', and also sympathises with the public's desire for ever lower emission levels. But emission quantities on their own are not enough." The US data are "not an indicator of potential risk to public health or the environment. Whether or not any risk exists depends on additional factors such as the toxicity of the emitted chemicals and potential for exposure."

    This point is particularly pertinent in the case of BP America in that 90% of its notifiable releases comprise wastes which are injected into deep wells, resulting in no public exposure. The data distort public perceptions of the risks posed by BP's operations, the company argues, and if used as a basis for single-minded campaigns aimed simply at reducing its total releases could also unreasonably distort its investment priorities.

    Disclosure dilemma
    This is a major dilemma likely to face most businesses when considering how to disclose information voluntarily. A very few, including Monsanto, have bitten the bullet and conceded that refusing to disclose in the rest of the world what has to be disclosed by law in the USA would leave them exposed to charges of inconsistency. Once firms have crossed that hurdle, the next stepping-stones - establishing environmental improvement targets and accepting the need to explain and justify them to external audiences - fall more easily into place.

    BP's management is probably well aware of the challenge it faces if it is to turn its experiment in disclosure into a successful routine programme - but if it is not then it will soon be told what was missing from "New Horizons" during a series of meetings with outside bodies to discuss the initiative.

    The first of these was held in London in January, and others are due to follow shortly in Brussels and Washington. Many of the points made above about "New Horizons" were echoed by representatives of environmental, academic and "green investment" bodies at the London meeting.

    The hints from BP's representatives at the meeting were that, with an environmental data collection effort already under way in some parts of the group, it will be in a stronger position to tell more about its current performance and its improvement targets when the next edition of "New Horizons" is published, probably in March 1993. And it will need to tell a better story if its aspiration to create value from a sound environmental performance is to be realised.

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