Corporate Social Responsibility

Coursework - Essay

Edinburgh Napier Number: 40271739

Submission Date: 08th November 2020

Word Count: 1,938

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Table of Contents

Table of Contents 1

Introduction 2

Analysis 2

Stakeholder Inclusiveness 3

Materiality 4

Accuracy 5

Balance 6

Conclusion 7

References 8

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Introduction

“Our purpose is reimagining energy for people and our planet. We want to help the world
reach net zero and improve people’s lives.” (BP, 2020, cover page) Two sentences in huge
fonts covering more than half of the cover page set the tone that carries through the rest of the
sustainability report. Quite a contrasting image of a company that caused the discharge of
almost 5 million barrels of oil into the Gulf of Mexico just 10 years ago and severely
damaged lives of people and wildlife in the area for years (Bureau of Ocean Energy
Management, Regulation and Enforcement, 2011).

This essay will attempt to critically analyse the quality of BP’s 2019 Sustainability Report by
challenging the statements and digging deeper than just taking information at a face value. Is
BP trying to communicate its genuine sustainability efforts, or is it just creating a facade of
positive achievements that are hard to verify and empty promises of future improvements?
The quality of the report will be assessed from the sustainability perspective, and whether it
brings a positive contribution to the sustainable future, or is just another case of green-
washing.

The Global Reporting Initiative’s (2020) Sustainability Reporting Standards will be used to
provide structure for evaluating the quality of BP’s 2019 Sustainability Report. Focus will be
on two of the principles defining report content (Stakeholder Inclusiveness, Materiality) and
two of the principles defining report quality (Accuracy, Balance) to allow for in-depth
analysis by applying relevant theories such as consequentialism, signalling theory, legitimacy
theory and others.

Analysis

According to KPMG (2017), 75% of the world’s 250 largest companies by revenue use GRI
framework for their sustainability reporting. This is the main reason GRI standards were
chosen for the analysis. The GRI (2020) states that the standards were designed to allow for
greater transparency and accountability of organisations. But what does that mean? Gray and
Milne (2002) argue that it is most likely impossible to have complete and transparent
statement of the impact of an organisation on the ecosystem and communities.

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Figure 1 - GRI Reporting Principles (2020)

GRI (2020) outlines (Figure 1) principles for defining report content and report quality. By
reviewing the definitions and guidance of the principles, four principles that were deemed
most relevant were selected to allow for deeper analysis within the word count.

Stakeholder Inclusiveness

Stakeholder Inclusiveness is defined as identification and consideration of reasonable

expectations of stakeholders and the action taken to address them (GRI, 2020). GRI (2020)
clearly states that this includes those stakeholders that are unable to raise their concerns
themselves. So in the case of BP, this covers return to shareholders, employee compensation
and safety, environmental impact on local communities through water and air pollution, and
even the impact on the wildlife around BP’s sites and so on. In a good sustainability report, it
would be expected that the reporting company includes the process of stakeholder
engagement and what impact it had on decision-making.

Employee engagement includes “town halls, webcasts and employee network events” (BP,
2020, p.12) but the report doesn’t say how many employees attended such events or how did
it link to any decision making. Unerman & Bennett (2004) highlight one of the key issues
when it comes to stakeholder engagement, and that is finding a consensus by different
stakeholders. Unerman & Bennett (2004) propose the only way a moral consensus can be
reached is if stakeholders participate in the discourse with a goal of reaching a mutual
understanding despite potentially having mutually exclusive expectations. BP (2020, p.12)
talks about engaging with investors on ESG issues but it doesn’t detail how many investors
were engaged, whether it was individual or institutional investors and how they reached
consensus on potentially differing investor expectations.

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Himick et al. (2016) argue that the nature of participation does have an effect on the outcome
of the engagement. So when it comes to BP’s engagement with local fishing communities in
Mauritania or Senegal through community liaison officers (BP, 2020, p.49), does it mean the
community that is directly impacted by BP’s decisions is spoken for? The danger here is that
in an effort to come across as more legitimate, the selected liaison officers may not be able to
adequately communicate the socioeconomic consequences for the fishing communities. As
Himick et al. (2016) highlight, this is because by trying to adapt to more technical reasoning
with BP’s experts, some of the key messages get disguised and focus shifts away from
discussing what’s important from a consequentialist point of view. As such BP can tick a box
for engaging with communities but the report does not show whether the expectations of
fishing communities are actually met.

Materiality

GRI (2020) defines materiality as topics that have a significant economic, environmental and
social impacts and weigh in heavily in stakeholders decisions. GRI (2020) also suggests that
the report should reflect the relative priority of material topics. However, only guidance on
the prioritisation without specific definitions or measurement techniques is given in Figure 2.

Figure 2 - Visual representation of prioritisation of topics (GRI,

2020)

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So according to this definition, a good sustainability report should therefore clearly explain
how it prioritised the topics included. But is that enough? BP’s 2019 Sustainability Report
has even got an independent assurance statement by Deloitte that says the report is compliant
in all material aspects (BP, 2020) although how the materiality of sustainability reports in
general is verified remains largely unclear (Boiral et al., 2019).

But the way the materiality should be assessed is whether the improved practices and
progress made by BP are having any material impact on improving the social and
environmental conditions (Tregidga et al., 2014). BP (2020, p. 20) is proudly displaying they
managed to reduce their greenhouse gas(GHG) emissions by 1.4Mte, however, their overall
GHG emissions increased by 0.4Mte (BP, 2020, p.24). BP’s (2020) justification is their major
acquisitions, however, the bottom line is, the GHG emissions they are responsible for are
having worse overall impact than they did a year ago and that is what is material.

Possibly the most material topic is to be net zero by 2050 as highlighted by Bernard Looney,
CEO of BP, on page 3 (BP, 2020). How is this going to be assessed and what steps are being
taken is unclear. Brander (2017) highlighted the need for consequential life cycle assessment
to consider full consequences of decisions taken. The net zero goal is admirable, however, if
attributional GHG accounting is used, it might not account for full environmental impact of
getting to ‘net-zero’ and only add to the near-term cumulative emissions and contribute to
climate tipping point before the true ‘net zero’ point is reached (Brander, 2017).

Accuracy

For information to be considered accurate by GRI, it needs to go into sufficient amount of

detail, so the stakeholders can understand it, and use it to make a clear assessment of the
organisation’s activities (GRI, 2020). Watts (2015) argues that this means very little to most
consumers and is further supported by GRI’s (2020) guidance that accuracy depends on the
nature of the information and who is using it, without any additional clarification. Further
point raised by Boiral et al. (2019) is the difficulty of precisely measuring a wide range of
sustainability performance measures such as biodiversity impacts or human rights. So how
can accuracy be assessed?

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Boiral et al. (2019) document how auditors focus on quantitative information rather than hard
to measure qualitative information to provide assurance of accuracy of information. So
should the quantitative information be taken at face value? BP (2020, p.44) claims to have
invested $0.1bn in local communities, but when we compare it to the total when broken down
by region, it only adds up to $83.8m (BP, 2020, p.45). Is this a genuine mistake? If so, how
was it not picked up by auditors? Or is this just a clever rounding to present information in a
more favourable light on a highlights page?

According to legitimacy theory, companies prefer to disclose information that is incomplete

or superficial to improve their sustainability performance impression and maintain legitimacy
(Hummel & Schlick, 2016). Even though some information such as investing to improve
water supply infrastructure in Mauritania (BP, 2020, p.45) is disclosed under Social
Investment, BP omits a lot of detail and provides largely anecdotal evidence of its efforts to
support communities it impacts..

On page 7, BP (2020) promotes “Advancing low carbon” through highlighting being in the
renewable business for more than 20 years and investing more than $500m in 2019 on low
carbon activities. This information is very numerically accurate and verifiable, however, it
could be argued that is more misleading than accurate. It creates a facade of a company that is
and has been very involved in advancing sustainability efforts (Cho et al., 2015), $500m
sounds like a lot of money to majority of readers, but what percentage of BP’s revenue does it
represent? The context of the amount is important for readers to assess how committed to low
carbon activities BP truly is.

Balance

Balance criteria requires the report to include both positive and negative aspects of the
organisation's activities, and this information needs to be free of bias to allow readers to make
their own judgement of the organisation in a sustainability context (GRI, 2020). Does that
mean a good report should be free of organisation’s interpretations and only offer facts?

Signalling theory suggests that not reporting negative aspects may lead to a speculation that
the report is overly one-sided and as such, not a reliable source of information (Hahn &
Lülfs, 2014). Despite that, throughout the entire 2019 Sustainability Report, only negative

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information disclosed was the two fatalities - “a fire-fighting assistant in Brazil and a
contractor in the US” (BP, 2020, p.41) and even there, BP quickly shifts attention to the
safety awards won. Presenting overly positive reports, may lead readers to believe that the
company acts sustainably and as Tregidga et al. (2014) pose it, this ‘changed’ identity will
maintain company’s legitimacy even though the ‘change’ is not big enough to provide
sufficient environmental improvement.

Conclusion

The GRI Standards (GRI, 2020) were designed to improve the global comparability and
quality of information on economic, environmental and social impacts of organisations.
However, the broad definitions and highly subjective nature of the standards, unfortunately,
create more ambiguity than transparency. And that poses a question: without clear guidance
that is not open to interpretation, what value do Sustainability Reports under GRI guidance
bring?

As highlighted in the analysis, the content of the report faces one major challenge, the trade-
off between not overloading reader with information and adequately disclosing all material
information. Considering the sustainability reports are very lengthy, can it be assumed that all
material aspects are covered? Or that all covered aspects are material? The key criteria should
be whether sustainability reporting is actually helping sustainability issues.

If that criteria is not met, it is just another case of green-washing that creates complacency by
pretending that a progress is being made. Organisations are more than happy to produce these
reports if it sustains their legitimacy and as long as these disclosures remain voluntary and
free of regulatory scrutiny, moving towards sustainable practices will continue to be a myth.

As is the case with BP’s 2019 Sustainability report, the compliance with GRI’s Principles for
report content and quality is hard to dispute. However, the analysis highlighted that a lack of
detail and very one-sided presentation may generate little value for advancing genuine efforts
on sustainability issues. This report therefore suggests that BP uses the Sustainability report
more as a marketing tool to maintain their legitimacy and diffuse the criticism in what is an
inherently unsustainable industry.

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References

Boiral, O., Heras-Saizarbitoria, I., & Brotherton, M.-C. (2019). Assessing and Improving the
Quality of Sustainability Reports: The Auditors’ Perspective: JBE. Journal of Business
Ethics, 155(3), 703-721. doi:http://dx.doi.org/10.1007/s10551-017-3516-4

Brander, M. (2017). Comparative analysis of attributional corporate greenhouse gas

accounting, consequential life cycle assessment, and project/policy level accounting: A
bioenergy case study. Journal of Cleaner Production, 167, 1401-1414. doi:https://doi.org/
10.1016/j.jclepro.2017.02.097

Bureau of Ocean Energy Management, Regulation and Enforcement. (2011). REPORT

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Global Reporting Initiative. (2020). CONSOLIDATED SET OF GRI SUSTAINABILITY

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Gray, R. H., & Milne, M. J. (2002). Sustainability reporting: Who’s kidding whom?
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Hahn, R., & Lülfs, R. (2014). Legitimizing Negative Aspects in GRI-Oriented Sustainability
Reporting: A Qualitative Analysis of Corporate Disclosure Strategies. Journal of Business
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Himick, D., Brivot, M., & Henri, J.-F. (2016). An ethical perspective on accounting standard
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