If a disaster has your name on it, your brand pays
Big process industry companies pay dearly if safety goes badly wrong, even if the front line operators involved in a disastrous accident are subcontractors or suppliers.
On 22 April 2010 the Deepwater Horizon oil rig, operated by BP and owned by US contractor Transocean sank two days after a massive explosion killed 11 workers. Since the explosion, at least 210,000 gallons of crude oil a day have been spewed into the Gulf of Mexico.
In the words of Group Chief Executive Tony Hayward, “We are fully committed to taking all possible steps to contain the spread of the oil spill. We are taking full responsibility for the spill and we will clean it up.”
That’s going to be expensive: BP’s share of the oil clean up costs alone will be £6bn or more according to some commentators. However, that figure does not include the reputational damage that BP is suffering already over the oil spillage, made all the worse by its previous record of problems in the US. In 2005 15 people were killed and 170 injured in an explosion at an oil refinery in Texas City. Some people think the company will have to ditch its brand within a few years.
BP shares have shed around 17 percent since the oil spill crisis began, wiping about £20 billion from the company’s stock market capitalisation.
Mr Hayward also told the BBC “This was not our drilling rig, it was not our equipment, it was not our people, our systems or our processes. This was Transocean’s rig, their systems, their people, their equipment.”
All of this may be true, but as we have seen BP will still pay dearly for this oil spill disaster. In future the industry must find ways of ensuring that all subcontractors and suppliers meet the same high safety standards as the big name companies who hire them.
This article is filed under: corporate responsibility