Approaches to Accounting for Corporate Social Responsibility

Discuss about the Case Study Of Deep Water Horizon Oil Spill.

This study deals with understanding the case of Deep water horizon oil spill that took place in 2010. This was one of the dangerous incident as it had caused death of 11 workers. All the five approaches to accounting for Corporate Social Responsibility had been explained in detail and these are descriptive performance reporting, quantitative reporting, full cost reporting as well as sustainability reporting and integrated reporting. After the explanation on all the five approaches, two of the approaches to accounting for Corporate Social Responsibility had been recommended to British Petroleum and these are Sustainability Reporting and Integrated Reporting (Wallace et al., 2017). These two approaches are properly explained in the study by referring the case of British Petroleum. Both the approaches are selected as by adopting sustainability and integrated approach, the company can demonstrate their renewed commitment for their appropriate corporate social behaviour.

In the year 2010, the Deep water Horizon Drilling Rig had suffered a huge catastrophic explosion and this had resulted in death of 11 workers as well as the sinking of the drilling rig. Addition to that, the explosion had even caused a massive offshore oil spill in the Gulf of Mexico that had been measured as one of the largest accidental marine oil spill in and across the world as well as largest environmental disaster in the US history (Starbird et al., 2015). By this, the British Petroleum had suffered fall in public relations and given financial punishment. The company had to give penalty of around $54 billion where for the environmental as well as economic damages it caused to the society as a whole. In this assignment, proper emphasis had been given to identify approaches to accounting for Corporate Social Responsibility so that British Petroleum can adopt ways for demonstrating their renewed commitment for their appropriate corporate social behaviour. The selected approaches should be based upon methods that has the ability to deliver reliable as well as consistent and transparent information to the shareholders. The study even suggest on how the information can be reviewed as well as assessed and validated by a third party organization (Powers et al., 2017).

There had been several approaches to accounting for Corporate Social Responsibility and these are descriptive performance reporting, quantitative reporting, full cost reporting as well as sustainability reporting and integrated reporting (Nixon et al., 2016). For this study, it is needed to select any of the two approaches from the above-listed five and then comment on why British Petroleum should use these two approaches to demonstrate their renewed commitment to appropriate corporate social behaviour.

Identifying Approaches for British Petroleum

Descriptive performance reporting is one of the type of approaches that help in understanding the crisis that are faced today by both practitioners and the researchers. British Petroleum faced crisis management from the Deep water Horizon Disaster that took place in the year 2010. It was then analysed that a large amount of secondary data was used from different sources and three-phase crisis management model. It was then found that BP had failed most of the time. The social as well as environmental image of British Petroleum was paradoxical.

From the collected data, it was noted that the explosive loss could have been prevented by making use of appropriate approaches by the company. Quantitative reporting is one of the effective way to understand by the figures and facts on what has led to such dangerous incident that had harmed so many people. During the oil spill, the British Petroleum had faced several shortcomings from their current reporting standards as well as practices. Integrated spin was neglected in some of the areas that lead to risk and there was mere integration of current financial as well as sustainability disclosure standards (Jacobs, 2016). The sustainability claims of British Petroleum were green wash as it came through with a vengeance. Furthermore, the Deep water Horizon experience renders essential lessons of thinking on how to present an effective integrated reporting and avoid integrated spin. During the year 2005 to 2009, the sustainability reports of BP showed that the company had high values as well as integrity where they actually had omitted the disclosure of available facts, opinions as well as metrics that can contradict the portrayal by any chance (Wallace et al., 2017).

Full cost reporting is one of the approaches that can be used by British Petroleum where they can analyse the cost that they would incur if they fail to abide by the environmental and social standards. The risk involved from this type of disaster should be properly analysed beforehand in order avoid future such events that can cause loss to humans. The incident involve risks for which neither industry nor government has been properly prepared but for which they can prepare themselves to face the world. In order to assure human safety as well as environmental protection, it is needed for the company to oversight the regulatory measures of leasing and initiate the idea to avoid such incidents in the near future.

Recommendations: Sustainability Reporting and Integrated Reporting

British Petroleum had been engaged in assured sustainability report from the year 1998 and this was before to the incident that took place in the year 2010 (Deep water Horizon Oil Spill). The company had institutional ownership of more than 10.5% and it was treated as a firm with low institutional ownership (Morgan et al., 2016). The company failed to include important aspects in their sustainability reporting and this was the reason behind the Deep water explosion. In the year 2010, the sustainability report of British Petroleum was evaluated by one of the 4 Audit firm (Ernst & Young) and it was commented that their work did not include any of the physical inspections of the operating assets that the company had (Powers et al., 2017). It is because operating assets is the asset that had been acquired for use in the conduct of any of the ongoing operations of the company that takes into account fixed long-term assets like Plant and Equipment. As far as case of British Petroleum is concerned, it was an oil rig and it goes to depict that sustainability reports can be crucial way to detect areas where business should and need to address (Lauritsen, et al., 2017).  

Whether integrated reporting shows integration of sustainability reporting standards as it complies into financial annual repot requirements or in that case brings forward new set of standards by adopting some elements of sustainability reporting (Wallace et al., 2017). By adopting this, it will be easy to avoid integration spin where the company neglects both sustainability as well as financial reporting experience. As per GRI guidelines, companies should contain general provisions that need most of the categories of disclosure where the reporting companies render additional important information for understanding performance of British Petroleum like key success, shortcomings, organizational risks, opportunities as well as changes made in the reporting periods for bringing improvement in the level of performance (Beyer et al., 2016). 

The two selected approaches to accounting for CSR that had been explained in the study will be sustainability reporting and integrated reporting (Wallace et al., 2017).

There are some of the important lessons to be learned before trusting the sustainability reports to conduct accurate assessments for the practices as well as performance of the company (British Petroleum) (Wallace et al., 2017). It is the responsibility of CSR practitioners as well as Experts to update as well as validate the methodologies for assessing the corporate CSR claims. In addition to that, business enterprise need to gather information where they should first identify any of the material issues. Most of the companies are relying upon Universal reporting frameworks such as Global Reporting Initiative for defining the possible list of environmental and social issues that can be significant to the business or in that case stakeholders (Kwok et al., 2017).

Valuing Accurate Sustainability Reporting

There has be to a much greater commitment by the industry to assurance that include third party audits of CSR reports. It is essential to check the accuracy of the data as well as claims that was shown in the BP report (Powers et al., 2017).

It can be seen that use of sustainability reporting can help British Petroleum demonstrating their renewed commitment to appropriate corporate social behaviour. The Global Reporting Initiative can be treated as one of the leading standard for corporate sustainability reports that had been developed after collaboration of Non- Governmental Institutions, companies as well as investors and stakeholders. More than 2000 companies had been involved in issuing reports referencing the guidelines from GRI. Therefore, GRI had invited suggestions of new topics that needs to be taken into consideration in the next round of its guidelines (King et al., 2015)

In this case, British Petroleum Deep Water Horizon Oil Spill was discussed as it is one of the environmental disaster. Here, sustainability reporting can play important role for anticipating as well as preventing the worst forms of corporate destruction in this planet. Companies will have to disclose their truths as well as start resisting their tendency of skipping out any of the bad news. The GRI reports of British Petroleum seem like a promotional brochure rather than a balance account for safety practices adopted by the company.

With use of integrated reporting, the company can move forward and face others in the market. The new momentum of integrated reporting actually combines the financial as well as sustainability reporting in a single report (Powers et al., 2017). The company eventually has to suffer several challenges for those who has been working for these years for developing the idea of sustainability reporting. The goal for refinement of GRO standards for next few years will to implement standard ready reporting framework that can be followed by the regulators as well as financial analysts and stakeholders at the same time (Daly et al., 2016).

Conclusion

At the end of the study, it is concluded that British Petroleum faced lot of issue after the incident (Deep water Horizon Oil Spill). The company was at fault and had to pay huge penalty as well. Sustainability reporting as well as integrated reporting had been explained in the above study because adopting these two approaches can help British Petroleum in demonstrating their renewed commitment for their appropriate corporate social behaviour. Integration and use of sustainable practices can help in bringing disclosure of sustainability data into the context of legal credibility checks as well as enforcement at the same time. These approaches had been utilized by Global reporting Initiative as it shows the process of self-portrayal. Complete analysis had been done by understanding both the approaches where the company should adapt the principles as applicable to all the disclosures to the investors.

Reference List

Beyer, J., Trannum, H. C., Bakke, T., Hodson, P. V., & Collier, T. K. (2016). Environmental effects of the Deepwater Horizon oil spill: a review. Marine pollution bulletin, 110(1), 28-51.

Daly, K. L., Passow, U., Chanton, J., & Hollander, D. (2016). Assessing the impacts of oil-associated marine snow formation and sedimentation during and after the Deepwater Horizon oil spill. Anthropocene, 13, 18-33.

Jacobs, D. (2016). Blowout: The Inside Story of the BP Deepwater Horizon Oil Spill. Brookings Institution Press.

King, G. M., Kostka, J. E., Hazen, T. C., & Sobecky, P. A. (2015). Microbial responses to the Deepwater Horizon oil spill: from coastal wetlands to the deep sea. Annual review of marine science, 7, 377-401.

Kwok, R. K., Engel, L. S., Miller, A. K., Blair, A., Curry, M. D., & Jackson, W. B. (2017). The GuLF STUDY: a prospective study of persons involved in the Deepwater Horizon oil spill response and clean-up. Environmental health perspectives, 125(4), 570.

Lauritsen, A. M., Dixon, P. M., Cacela, D., Brost, B., Hardy, R., MacPherson, S. L., … & Witherington, B. (2017). Impact of the Deepwater Horizon oil spill on loggerhead turtle Caretta caretta nest densities in northwest Florida. Endangered Species Research, 33, 83-93.

Morgan, O. A., Whitehead, J. C., Huth, W. L., Martin, G. S., & Sjolander, R. (2016). Measuring the impact of the BP Deepwater Horizon oil spill on consumer behavior. Land Economics, 92(1), 82-95.

Nixon, Z., Zengel, S., Baker, M., Steinhoff, M., Fricano, G., Rouhani, S., & Michel, J. (2016). Shoreline oiling from the Deepwater Horizon oil spill. Marine pollution bulletin, 107(1), 170-178.

Nixon, Z., Zengel, S., Baker, M., Steinhoff, M., Fricano, G., Rouhani, S., & Michel, J. (2016). Shoreline oiling from the Deepwater Horizon oil spill. Marine pollution bulletin, 107(1), 170-178.

Powers, S. P., Peterson, C. H., Cebrian, J., & Heck Jr, K. L. (2017). Response of nearshore ecosystems to the Deepwater Horizon oil spill. Marine Ecology Progress Series, 576, 107-110.

Starbird, K., Dailey, D., Walker, A. H., Leschine, T. M., Pavia, R., & Bostrom, A. (2015). Social media, public participation, and the 2010 BP Deepwater Horizon oil spill. Human and Ecological Risk Assessment: An International Journal, 21(3), 605-630.

Wallace, B. P., Brosnan, T., McLamb, D., Rowles, T., Ruder, E., Schroeder, B., … & Wehner, D. (2017). Effects of the Deepwater Horizon oil spill on protected marine species. Endangered Species Research, 33, 1-7.