As the society embarks into the 21st century, a developing recognition on the magnitude of sustainability is emphasized. With the increased pressure imposed by “green consumers”, a phenomenon of green business practices is being nurtured, drawing companies to “greenwash” business to emerge as an environmentally and socially responsible corporation.
To enhance the corporate image, many resort to the use of Corporate Social Responsibility (CSR) communication, one of the main ethical marketing practices present. Nonetheless, due to the established CSR claims, consumers are often being misled, hence failing to identify the truly responsible firms.
As much as companies use CSR to report sustainability in the forefront of the business, the background could merely be an attempt to green-wash their business conduct. In the world of commerce, the presence of dubious and immoral actions is inevitable for sustainability of profits, market share and public image to take place. I will examine this fact by applying Shell and British Petroleum (BP) as a case study, determining if companies are indicating a genuine change in business conduct or simply green-washing consumers of the company’s awareness of sustainability issues. Sustainability
The concept of sustainability has been defined as involving both resource management and equity elements for current and future generations (Dymond 1997).The vital concern of sustainability is that joint human influences can compromise the survival of future generations and the ecosystems, which they depend on (H.M et al. 2010). Alternatively, the term of “green washing” was coined by Jay Westerveld, a New York environmentalist in a 1986 essay, referring to the use of marketing by companies to deceive consumers of their products and procedures as eco-friendliness (Romero, 2008).
With an increase demand for green-related products among the consumers, companies have sought in the use of attention deflection. It is a strategy used to bring out certain desirable activities sequentially to evade analysis of other practices, deemed as unconventional to institutional standards (Okhmatovskiy & David, 2012). Deliberation actions like developing self-regulation programs and campaigns (Gunningham, 1995; Sasser etal,2006), and shoring up their social image (Morris & King, 2010), are designed to mask their overall performance, in an attempt to avoid questionable conduct.
To identify how corporations green wash their business conduct, I would first address on what oil companies are saying about sustainability issues and duty undertaken by them to execute sustainable business decisions. The oil industry operates in a division of three sectors: upstream, midstream and downstream.
The upstream encompasses exploring and extracting of crude oil and natural gas, the midstream function as distribution system that transport crude oil or refined products, while the downstream includes refining supplies, marketing, and retail distributions. Perhaps the operations of oil companies may be seen as eco-friendly, however in terms of decision making and business products, companies are not necessarily as sustainable as they declared. Internal Sustainability Conduct: BP and Shell
In response to what companies are saying, I have gathered data from the various annual reports for an analysis on the words used by companies to describe themselves as being sustainable while portraying an image of being green. The objective of this analysis is to infer from the use of sustainability–related words by companies, which acts as a form of description upon their business conducts in relation to the impression represented. In the context of BP, during the earlier year, company has been utilizing mainly on the word “oil” instead of “energy”.
However, in view of the climate change in 2005, BP has revealed an evident change where “energy” is being greatly emphasized on. Corresponding to this change, there was a strong enhancement on words relating to new technologies and pollution, which linger significantly till today. This is in contrast to the word “profit”, which was previously used extensively. Now, “pollution” and “green environment” are considerably highlighted on (BP Annual Reports, 2000-2012).
Conversely, Shell has its first sustainability report published in 2004 and in comparison with those previous year reports, it was observable that “oil” is being replaced by “energy”. Additionally, words like “pollution”, “new technologies” and “climate change” have been presented to disguise “profit” which was applied widely before (Royal Dutch Shell annual reports, 2003-2012). Alternative energy strategies
Alternatively, oil companies have started to shift their commitment towards investing in renewable energy. With the recent release statement by BP, it highlights their commitment to develop a new approach in creating a low-carbon business. This involves constant investment in alternative energy sources such as, bio fuels, wing power, solar power, carbon capture and sequestration (Strategy Presentation, 2010). On the other hand, Shell’s taking a different approach in the investment of alternative energy by addressing on the energy challenged phases rather than working on the argumentation on carbon emissions.
The company understand the need to combine the non-fossil fuel sources in order to increase fossil fuels to meet the requirements, with emphasize on the importance to develop and execute technologies to cope with the challenges set forth (Alternative Energy –Innovation, 2010). Despite the additional effort taken to invest in sustainable product and business strategy, stimulating growth in the renewable energy industry, the extent to which oil companies’ investment to sustainable development remains questionable. To further investigate oil companies’ doing, I would be analyzing on the greenness of operation through identifying the emissions of carbon dioxide (CO2), sulphur dioxide (SO2) and nitrogen oxide (NOx) against their business sustainability.
As the amount of emission is intertwined with the company size, the production of CO2 will be divided by total barrels of oil equivalent (BOE) per year, to achieve the accuracy of result. BOE is a unit of energy used from the release of each burring barrel of crude oil. It is used as a measure to report business growth as it tabulates companies’ yearly production. BP has developed slow and steadily for the past couple of years, along with Shell showing a consistency in the overall growth of company.
The distillation process and refining procedures are the mainstream of company operations report. Measures has been taken by each company has since show a significant decrease in the emissions of CO2. In order to generate profits and remains in business, oil companies are heading towards substantial increase in BOE production. Profit of oil companies is repeatedly discussed as a way to state the “obscene” or “irresponsible” operation of Big Oil (Mouawad, 2010). Due to the massive scale of operations involve, the oil industry does not only revolve around high revenue, but also with the high costs incurred.
Hence, oil companies have to make considerably higher investments in line for business to remains sustainable. With regard to the oil result, the high emission of CO2 is greatly due to the consumers’ carbon footprint; however, to safeguard consumer’s greatest interest, oil companies chose to report the emission largely due to business operations instead of consumer’s behaviours.
Over time, oil companies have shown a great effort in reducing the emissions of these harmful gases, which is both beneficial to the environment and companies as well. This not only enables company to improve efficiency in operations, but also financially, as it assure alliance to both current and future strategy. External Sustainability Conduct: BP and Shell
External actions are usually taken by companies in an attempt to cover up the tainted image created by the undesirable businesses conduct. As mentioned in Powell and DiMaggio theory on “new institutionalization”, the explanation of how companies could resemble each other through the framework of coercive, social and organizational is discussed (DiMaggio and Powell, 1983).
Coercive pressures include media, often with a skeptical tone in relation to oil companies. Anne Mulkern published a piece “Oil Companies” with a message titled, “They're Not Just about Oil." (Mulkern, 2009). The article explores the brand expansion of oil companies and presents detachment between green messages in marketing and actual plans of oil companies’ investment in renewable resources. Restraining from the central attention of the media, serves as an advantage towards companies, as lesser attention are being drawn towards their lack of sustainability.
Another form of coercive pressure is advocacy campaigns. It acts to offset the existence of unfairness and distorted presentation of company promoting a more positive image to influence the public opinions. Every year, non-profit sources and company’s websites publish environmental or even corporate responsibility rankings, based on separate measures, contributing in building reputation and trust for the brand (“Our Performance Data,” Royal Dutch Shell). While it isn’t expected of oil companies to be leading in ranking of the world’s most environmentally responsible companies, their gradual comparable behaviours could be part of an effort to gain positive recognition. CSR
In the world of commerce, the presence of uncertain and dishonest actions are inevitable, promoting “green washing”, while causing CSR initiatives to be seen as empty, hypocritical, opportunistic and ineffectual. In line with the Friedman classical CSR perspectives, stating “business as a whole cannot be said to have responsibilities” (Freidman, 1970), he argued that business main objectives should focus on maximizing profits instead of being held socially responsible for business operations. However, Freeman on the other hand, denotes it as “Understanding business as a set of relationship among group, possessing a stake in the business activities”.
In another word, it is a stakeholder theory encompassing descriptive, instrumental, managerial and normative factors, which sees company as being a part of the social body (Freeman, 1984, Philips, 2003). Triple Bottom Line
In view of Carroll’s CSR, with respect to John Elkington model about Triple Bottom Line (TBL), both frameworks suggest that for an organization to be sustainable in long-term, company need to look beyond the financial sector and work on the three components of corporate sustainability namely the social, environmental and financial (Elkington,1997). Social
The operation of a company is not solely dependent on the financial and environmental resources; however it is highly reliant on both the human and social capital within the company. Encompassing stakeholder engagement helps promote social performance, thus building a positive reputation and goodwill with the external stakeholder, hence leading to socially sustainable companies. Environmental
Natural resources used for a firm’s production involves both renewable and non-renewable, which encompasses the ecosystem. Hence, development of economic value is from the consumption and utilization of natural resources, in line with the maintenance of ecosystems. Therefore, ecologically sustainable companies do not conduct business activities that produce emissions exceeding beyond the required capacity of natural system. Financial
A company relies on both tangible and intangible assets to function. Hence company has to ensure sufficient cash flow to meet financial obligation, as well as, high returns on profit to avoid termination of shareholders. Therefore, corporations have to control these assets to guarantee business continuity in order to be economically sustainable. Conclusion
With a rising trend of green consumers today, companies are realizing the importance of a sustainable image. However, the emphasis on financial profit results in deceptive sustainability reporting. Leading companies like BP and Shell are deliberately reporting sustainability in an effort to green-wash its business conduct. However, based on the information mentioned above, indicting companies on green washing can be over generalizing as increasingly, respective oil companies have taken efforts in promoting a sustainable development. Nonetheless, adoption of new legislation such as additional of federal regulation is needed to curb green-washing, and that regulation should be binding and enforceable.
Additionally, codes of ethics instil sustainable principles in employee, incorporating the system of control and punishment in prevention for any violation of norms and rules. The duties of the management involve inculcating these codes of ethics for the employees to comply on, as well as considering the diverse priorities present to avoid disagreement with other stakeholder’s interest. In conclusion, the triple bottom line concept should be adopted by companies to ensure profitability and an accurate image of sustainability in the long run, producing trust and building brand loyalty.