CSR – A view from BP
Speech delivered at the CSR Forum, held at the School of Economics and Management,
Tsinghua University, by Dr Gary Dirks (BP China)
24th April 2004
Chairman Dawson, President Wang, Distinguished Guests,
faculty and students.
Good afternoon.
I am delighted to have the opportunity to join you here at
Tsinghua University today to celebrate the 20th anniversary of
the School of Economics and Management.
I am honoured
to contribute to a discussion about the important subject of
corporate social responsibility.
It is a particular pleasure to
co-host this forum with my good friend President Wang of
Sinopec.
As I see it, Corporate Social Responsibility is just one aspect
of a larger debate that is both basic and very old - a debate
about just societies, and the roles of the state, civil society
and commerce in creating and sustaining them.
Seen in
this way Corporate Social Responsibility is specifically a
debate about the appropriate and desirable role that
companies play in society.
This makes the subject complex, but also rich for debate,
particularly here in China where we are seeing a rapid
reshaping of the social and economic landscape.
I am conscious that CSR is a big subject… too big to cover
exhaustively here today.
I will therefore necessarily be
selective.
At the outset it is important to recognize that the role of
corporations can be different from one society to the next.
My company comes from a western market oriented tradition,
where the primary role of companies is – by law – to operate in
the interest of shareholders.
Thus in the West on hears a
great deal about shareholder value and creating shareholder
value.
In contrast here in China enterprises come from a state owned
tradition where companies were managed for the collective
interest of society.
Given that there are differences it is
relevant to ask if there can be common ground when
discussing Corporate Social Responsibility.
I believe there
is and the common ground is based on how companies
perform their role in society – how they go about their day to
day business.
Seen this way CSR goes beyond looking at a company’s
philanthropic efforts.
CSR is not about how companies
spend a proportion of their profits.
It is about the more
fundamental question of how they produce their goods and
provide their services.
profits.
It is about how they make their
While philanthropy can be a worthy element of a
company’s external affairs strategy, it is not an indicator of
responsible behaviour.
This perspective is very much in keeping with much current
debate in China around the role of companies, particularly as
their role in society is reviewed within the notion of “scientific
development” which Chinese experts have been exploring
since the 16th National People’s Congress.
If CSR is about a company’s behaviours and practices, what is
the standard against which these behaviours and practices
should be assessed?
I will explore this question from my
experiences in BP, not because we have all the answers. I am
convinced we don’t – I expect to learn much here today.
Rather BP is what I know best; it is the frame of my own
experience - of my own career.
At BP we begin the “CSR journey” by recognizing that the
primary responsibility of the company and its management is
to: maximize the value of the firm over time, and to operate
the company in a manner consistent with the norms and
values of its shareholders.
At first glance this looks deceptively simple, but on deeper
reflection it is apparent that from this simple foundation flow
some complex issues.
Shareholders change over time as
do their values and norms.
And in maximizing the value,
the concerns and expectations of all stakeholders are of great
importance - as their views will influence our operating
environment and how it evolves.
This leads to the notion that firms need to pay attention to
their ‘licence to operate’ – not a formal legal licence, but an
informal licence that looks not just at what is legally
permissible but what is socially acceptable both today and
tomorrow.
It is this concern about the operating environment, and a
firm’s license to operate within it, which provides much of the
impetus for many corporations, including BP, to undertake a
broader role in societal affairs.
Let me explain.
At BP, we believe deeply in our economic purpose.
Our
products and services contribute directly and indirectly to a
better quality of life.
They provide the freedom to move,
power to heat or to cool and light to see.
I’m proud of our core business: the products we make that
satisfy millions of customers every day; the quality of jobs we
provide to over 100,000 people around the world; the support
we give to societies through payment and even collection of
taxes;
the
innovations
we
make
in
technology
and
management.
We reward our shareholders and recover the cost of capital so
that we can continue developing the new processes, products
and ideas whose time has not yet come, but which will be vital
if we are to conserve the environment for future generations.
But what about the apparent paradox that the very products
we
produce
and
impacts
we
make,
may
in
certain
circumstances - even if we stay within the law - have the
potential not to be a force for good, by perhaps impacting
negatively, on the environment or on the communities living
near our operations.
Shouldn’t we just obey the lay, pay our taxes and leave
everything else to be sorted out by others?
Some Western
thinkers would say yes.
We’ve felt in BP that simply operating within the law of the
land is not an adequate answer to our shareholders – as over
the long term, societal norms change – and laws change.
Poor practices even if legal will cast a shadow over our future;
ignoring changing circumstances - social trends or new
scientific insights - present risk to our company and its
shareholders.
I will illustrate this point with the question of climate change.
In
the
late
1990s,
there was
growing
evidence
precautionary action on climate change was desirable.
that
As a
company developing, producing and marketing hydrocarbons,
we felt that we needed to tackle this issue, rather than avoid it.
If mankind was in fact altering the climate, then the energy
industry must be part of any solution.
In 1998, in the spirit of
the Kyoto Protocol we set targets to reduce our internal
emissions by 10% on a 1990 baseline by 2010.
Not because
we had to by law, but because we felt we needed to respond to
new information that over time would lead to measures
effecting our operating environment and our license to
operate.
In the event, we were able to deliver our targets in 2001 well
ahead of plan.
Why?
Because doing something good for the environment felt like
the right thing to do for many of our staff, our policy generated
enormous creativity.
approaches.
This led to a multitude of innovative
Two of these new approaches (using emission
caps and allowance trading), meant that every portion of our
business had targets and became involved in finding
opportunities to cut emissions.
Surprisingly, as we look
back on our work today, one of the most significant findings
was that doing the right thing was good for business: in the
first three years we added US $ 560mn of value to our firm for
an investment of around US$ 20mn.
This example concerned our view of responsible behaviour
concerning core products.
I would now like to comment
briefly on operating practices and corporate behaviour.
We live in a world where commerce is globalizing - where
companies from virtually anywhere in the world can compete
for business virtually anywhere else.
A world where there
are multinational corporations whose economic scope and
scale is no longer limited by political boundaries.
This phenomenon is coupled with the rise of civil society and
a communications revolution where news in one locality is
beamed across the globe within seconds.
In this new world, how do we balance the need to be sensitive
to local culture and circumstance, with the need to treat all our
customers, employees, partners and other stakeholders with
the same standards?
Indeed do we need to treat them with
the same standards?
As the BP group grew in the 1990s and spread its geographic
base, we felt a growing need to articulate what were felt to be
our standards or values.
This led to the development of a company document which set
out the core values of our company.
The document sets out
our values, as well as setting aspirations and boundaries on
business practices and behaviours.
As an example of an
aspiration we as a company aim to have no accidents.
A
boundary for our businesses prohibits knowingly employing
child labour.
This document was the start of a journey to identify where we
as a company felt that we had to behave in a consistent
manner no matter where we operated.
Many aspects of it
were based on international law and guidelines.
But there
were also aspects of that document that reflected strong
shared values at BP – prohibiting say the giving of bribes.
Of course a values based document raises the interesting
question of cultural differences from one part of the world to
the next.
In producing that document, and as we have
refined it, we have had to reflect on the meaning of values,
norms and practices.
Let’s take values first.
Though I'm aware I'm stepping into a
long running debate on the philosophy of ethics, I maintain
from my experience of working between different cultures that
certain values are universal.
Regardless of culture or creed,
societies prize security and safety, dignity and respect,
integrity and honesty, accountability and responsibility,
fairness, justice and courage.
However different cultures find different resolutions when
values conflict.
These differences are reflected in different
cultural norms. The differences are legitimate and need to be
respected.
They must be treated with respect and sensitivity.
These differences may be reflected in what constitutes
acceptable social behaviour or in religious practices.
Finally there are current practices where differences can again
be significant.
Practices need scrutiny.
While they may
often be derived from cultural norms, over time their founding
principles may become blurred or even distorted, so current
practices may become a perversion of norms and values
rather than an accurate reflection of them.
Thus a perfectly
acceptable norm of gift giving can become distorted into the
unacceptable practice of giving and receiving bribes.
Perhaps the simplest test of whether a practice has become a
perversion of values and norms is to ask oneself whether the
promotion of such a practice would win public support,
whether a leader would be embarrassed to be heard
advocating it, whether you would be proud to tell family or
friends.
There may be some of you in the audience today who say: “be
practical, in real life you might have to pay a bribe, turn a blind
eye to the pollution your operations produce, or allow less
than ideal safety standards in your workplace…”
My point is that neither I, nor my colleagues on the stage could
set out a business manifesto based on paying bribes,
producing pollution, or having an unsafe workplace.
People
do actually know deep down what their values are – and that
they may differ from current practices.
I make this distinction between values and norms on the one
hand, and practices, which may be common but which may be
distortions of cultural norms, on the other, because I believe
firms should respect cultural norms but work with others to
eliminate aberrant practices.
We also need to be in real
dialogue with our partners and other stakeholders wherever
we operate about how we best deliver common values, taking
into account local cultural norms.
Let me give you an example.
in joint ventures.
BP and Sinopec work together
I have served as a Board Director under
the Chairmanship of President Wang for one of our joint
venture and I serve under his Chairmanship now on the Board
of the China Business Council for Sustainable Development.
What we don’t need to discuss is whether we both would like
to see a workplace free from accidents.
do.
Of course we both
But where we do have real and meaningful discussion is
on how best to deliver that aspiration.
Both BP and Sinopec
have clear safety standards, but in a joint venture context we
need to really listen to each other to understand how best to
make them live – taking account of our two different cultures.
What neither of us would accept is to use local conditions as
an excuse for failing to deliver a safe working environment.
This is a complex area, but one which I think goes to the heart
of what we mean by CSR in a globalised world.
I am
optimistic that as we think more deeply about these issues,
and as we have more opportunities like the one today to share
opinions, we will over time get greater and great clarity on how
we reconcile our shared values with cultural norms, even if at
first glance they may seem to be in contradiction.
As BP’s staff and leadership have become more diverse our
understanding of these issues and our internal ability to
articulate our positions on them has improved.
But this is
just the beginning of a journey which will need us all to listen
generously to each other.
To conclude, I should like to argue that multinationals like BP
are bound for both moral reasons and business reasons to
move away from practices which do not reflect the underlying
values and norms of their shareholders or of the societies
where they operate.
This in turn means that we need to push for a truly consistent
application of standards globally.
While no two companies
will articulate their values in the same way, I truly believe that
those of us working in international business should work
together to reject aberrant practices - even if it means short
term sacrifice in business or competitive advantage.
Thank you for you attention.