Stanford GSB: Stanford Business September 1997

Breaking Ranks

AN OIL EXECUTIVE SERVED NOTICE ON HIS INDUSTRY AT AN INTERNATIONALLY BROADCAST SPEECH AT THE BUSINESS SCHOOL IN MAY.

By John Browne, Sloan '81

The world in which we live is no longer defined by ideology. The old spectrums of left to right and radical to conservative are still with us, but ideology is no longer the ultimate arbiter of analysis and action. Governments, corporations, and individual citizens have all had to redefine their roles in a soci ety no longer divided by an Iron Curtain. A new age demands a fresh perspective on the nature of society and responsibility.
The passing of some of the old divisions reminds us that we are all citizens of one world, and we must take shared responsibility for its future and for its sustainable development. We must do that in all our various roles: as business people with capital to invest, as legislators with the power to make law, as individual citizens with the right to vote, and as consumers with the power of choice. The global environment is a subject which concerns us in all our various roles and capacities. I believe that we've now come to an important moment in our consideration of the environment: the moment when we need to go beyond analysis to seek solutions and to take action. It is a moment for change and for a rethinking of corporate responsibility.
A year ago , the Second Report of the Inter-Governmental Panel on Climate Change (IPCC) was published. That report and the discussion which has continued since its publication shows that there is mounting concern about two stark facts: The concentration of carbon dioxide in the atmo-sphere is rising. And the temperature of the earth's surface is increasing.
There's a lot of noise in the data. It is hard to isolate cause and effect. But there is now an effective consensus among the world's leading scientists and serious and well-informed people outside the scientific community that there is a discernible human influence on the climate and a link between the concentration of carbon dioxide and the increase in temperature. The prediction of the IPCC is that over the next century temperatures might rise by a further 1 to 3.5 degrees centigrade, and that sea levels might rise by between 15 and 95 centimeters.
Those are wide margins of error, but it would be unwise and potentially dangerous to ignore the mounting concern. The time to consider the policy dimensions of climate change is not when the link between greenhouse gases and climate change is conclusively proven, but when the possibility cannot be discounted and is taken seriously by the society of which we are part.
We in BP have reached that point. We must now focus on what can and what should be done, not because we can be certain climate change is happening, but because the possibility can't be ignored. If we are all to take responsibility for the future of our planet, then it falls to us to begin to take precautionary action now.
There are two kinds of actions that can be taken. The first would be dramatic, sudden, and surely wrong. Actions which sought, at a stroke, drastically to restrict carbon emissions or even to ban the use of fossil fuels would be unsustainable because they would crash into the realities of economic growth. They would also be seen as discriminatory, above all in the developing world. The second kind of action is that of a journey taken in partnership by all those involved, a step-by-step process involving both action to develop solutions and continuing research that will build knowledge through experience.
BP is committed to this second approach, which matches the agreements reached at Rio based on a balance between the needs of development and environmental protection. The Rio agreements recognize the need for economic development in the developing world. We believe we can contribute to achievement of the right
balance by ensuring that we apply the technical innovations we're making on a common basis, everywhere in the world. What we propose to do is substantial, real, and measurable. I believe it will make a difference.
Of the world's total carbon dioxide emissions only a small fraction comes from the activities of human beings, but it is that small fraction that might threaten the equilibrium between the much greater flows. We've looked carefully at the precise impact of our own activities. Our operations--in exploration and in refining--produce around 8 megatons of carbon. A further megaton is produced by our chemical operations. If you add to that the carbon produced by the consumption of the products we produce, the total goes up to around 95 megatons. That is just 1 percent of the total carbon dioxide emissions which come from all human activity. Only a fraction of the total emissions comes from the transportation sector, so the problem is not just caused by vehicles. Any response that is going to have a real impact has to look at all the sources.
As a company, our contribution is small, and our actions alone could not resolve the problem. But that does not mean we should do nothing. We have to look at both the way we use energy--to ensure we are working with maximum efficiency--and at how our products are used. It also means contributing to the wider analysis of the problem--through research and technology and through engagement in the search for the best public policy mechanisms, the actions which can produce the right solutions for the long-term common interest.
We have a responsibility to act, and I hope that through our actions we can contribute to the much wider process which is desirable and necessary. BP accepts that responsibility, and we're therefore taking specific steps:

to control our own carbon dioxide emissions
to fund continuing scientific research
to take initiatives for joint implementation
to develop alternative fuels for the long term
and to contribute to the public policy debate in search of wider global answers to the problem.

No company can be really successful unless it is sustainable--unless it has capacity to keep using its skills and to keep growing its business. Of course, that requires a competitive financial performance. But it requires something more, perhaps particularly in the oil industry. The whole industry is growing because world demand is growing. The world now uses almost 73 million barrels of oil a day, 16 percent more than it did 10 years ago. In another 10 years that figure is likely to be more than 85 million barrels a day, and that is a cautious estimate. Some people say it will be more. For efficient, competitive companies, that growth will be very profitable.

But sustainability is about more than profits. Real sustainability is about simultaneously being profitable and responding to the reality and the concerns of the world in which you operate. We're not separate from the world. It's our world as well. To be sustainable, companies need a sustainable world. That means a world where the environmental equilibrium is maintained but also a world whose population can enjoy the heat, light, and mobility which we take for granted and which the oil industry helps to provide. I don't believe those are incompatible goals.

All the actions we're taking and will take at BP are directed to ensuring that these goals are not incompatible. There are no easy answers. No silver bullets. Just steps on a journey which we should take together because we all have a vital interest in finding the answers. The cultures of politics and of science and of enterprise must work together if we are to match and master the challenges we all face.

The American futurist Francis Fukuyama describes the future in terms of the need for a social order, a network of interdependence which goes beyond the contractual, an order driven by the sense of common human interest. Where that exists, societies thrive. Nowhere is the need for that sort of social order--at the global level--more important than in this area. The achievement of that has to be our common goal.

ABOUT JOHN BROWNE:

A company man since the age of 16, British Petroleum Company's group chief executive John Browne started with BP as a university apprentice and has held positions of increasing responsibility since then,
taking time off to graduate from St. John's College,
Cambridge, and earn his MS from the Sloan Program at the GSB. Browne may have been talking about people like himself last May when he told his audience at Stanford: "The
people who work in BP are certainly business people, but they're also people with beliefs and convictions, individuals concerned with the quality of life for themselves and for their children. When they come through the door into work every morning, they don't leave behind their convictions and their sense of responsibility."

MEET THE PRESS:
A Mixed Reaction to Browne's Speech
JOHN BROWNE'S May 19 speech and announcement that BP would pour up to $20 million into a California solar power plant drew an immediate reaction from environmentalists, the oil industry, and government agencies, as reported by newspapers in the United Kingdom and the United States:
The plans to expand solar energy activ-ities were welcomed by Greenpeace environmental campaigners who last month scaled BP's exploration headquarters in Aberdeen to fit solar panels in protest against the start of production from the company's first Atlantic oil field. But Chris Rose, a Greenpeace spokesperson, claimed the oil company still failed to recognize the inescapable logic that avoidance of dangerous climatic change would require phasing out of oil and gas use. "Greenpeace will continue to oppose BP and other oil companies which continue to expand the oil reserves of industrial countries," he said.
--FRANK FRAZER
The Scotsman, May 20
BP's stance was swiftly attacked by Greenpeace for not going far enough. This no doubt will reinforce a prevalent industry view, expressed by Shell, that whatever companies do on the environment, it is never enough for environmentalists. But Mr. Browne's speech will have done the environmentalist movement at least two favors. First, BP's stance sets a higher standard against which to judge other companies' readiness to cooperate with efforts by governments to fight climate change. Second, it will increase pressure on governments such as the UK to provide the "public support and investment" Mr. Browne called for to bring the costs of solar down more quickly.
--LEYLA BOULTON
Financial Times, May 20
Stephen H. Schneider, a climate researcher and Stanford professor who wrote the first popular book on global warming, said the speech was a welcome change of direction for an industry that has, until now, denied that global warming is a problem. "They're out of climate denial," Schneider said.
Norm Szydlowski, general manager of health, safety, and environment for Chevron Corp. in San Francisco, said the concern is that efforts to limit the release of greenhouse gases could severely disrupt economies--and later turn out to be unnecessary.
Browne's speech was praised by the head of California's Environmental Protection Agency. "This bold move will set the world stage for other companies to emulate," James M. Strock said.
--GLENNDA CHUI
San Jose Mercury News, May 20
"He's out of the church," said one industry guru, speaking on condition of anonymity.
The executive vice president of the American Petroleum Institute, William O'Keefe, portrayed Browne's speech as nothing out of the ordinary. "Some characterize us as 'just say no--don't do anything,'" about global warming, O'Keefe said. "That's wrong." But he added: "There remains a high degree of uncertainty about what the effect is of increasing [gas] emissions."
Within the environmental community, Browne's comments were seen as a break as stunning as that which shook the tobacco industry two months ago when the Liggett Group acknowledged that smoking causes cancer and heart disease. "The oil industry is now split over global warming, and that's significant. They're a powerful player," said Dan Becker, a Sierra Club staff member who specializes in global warming and petroleum issues. "They're doing something, and they're doing something in the right direction. One cheer for BP."
--JAMES GERSTENZANG
Los Angeles Times, May 21
Senate Majority Leader Trent Lott (R-Miss.) took a couple of shots last week at the 1970s, hippies, and solar freaks in a speech to the Independent Petroleum Association of America. "I'm sure you petroleum folks understand that solar power will solve all our problems," Lott noted, apparently facetiously. "How much money have we blown on that? This is the hippies' program from the seventies and they're still pushing this stuff," Lott said, according to a Reuter report. A few days later, British Petroleum chief executive John Browne, not heretofore known as a flower child, also talked about solar power.
--AL KAMEN
Washington Post, May 23

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