From the July 2010 issue of Investment Advisor • Subscribe!

A View Across the Table From BP

Sidebar to Robert Keane's column "Food for Thought From A Tragedy"

Bennett Freeman has a history of working on issues with BP that stretches back more than a dozen years and includes his work as senior VP for sustainability research and policy at Calvert Asset Management. Prior to that, he worked in the State Department as the Clinton Administration's Deputy Assistant Secretary for Democracy, Human Rights and Labor.

"There were grounds to think of BP as relative leaders in the oil industry from a corporate responsibility and sustainability viewpoint," says Freeman, stressing the past tense. "They were the first major oil company to acknowledge the reality of global climate change and to commit to address it, both by investing in alternative energy and trying to meet their own emission reduction targets."

That position, under former CEO Lord John Browne, put the multinational at odds with its big oil peers and caused much industry anger to be directed at BP, which began investing in alternative energy to a much greater degree than others in the industry, although it has reduced its emphasis on such efforts since Browne's departure. Freeman says that BP has also been a leader in the oil industry on human rights issues, which have been another area of significant import to SRI investors.

"Those were real bona fide leadership commitments that BP established and they engendered a lot of good will through very focused stakeholder engagement," Freeman recalls. "They not only engendered good will but they unduly raised expectations."

Opinions of BP were still pretty high due in large part to the multi-million dollar "Beyond Petroleum" public relations campaign that helped create the widespread impression of BP as a forward-thinking company concerned with fighting global warming and finding viable alternatives to carbon-based fuels. Then came the accident at the company's Texas City refinery, which killed 13 workers in 2005. That was followed a year later by the discovery of a more than 200,000-gallon oil spill in the Alaskan wilderness near Prudhoe Bay, for which the company paid a $20 million fine.

In the wake of the Gulf oil rig accident, it appears that BP did not take those previous incidents as wake-up calls in terms of safety or the potential risks from leaks. Instead the company appears to have become more focused on performance.

"I think this is a story of both corporate and government irresponsibility and the lead appropriately is BP's irresponsibility, but we need to see the government get its act together and what I mean by that is appropriately focused and sufficiently resourced regulation of what remains by definition high risk deep offshore oil drilling," says Freeman.

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