The legacy of Exxon Valdez

The Exxon Valdez came aground in Prince William Sound just after midnight on 12th March 1989. What followed was one of the worst environmental disasters to hit US shores. 10.8 million barrels of oil (roughly the volume of 125 Olympic-size swimming pools) was poured out into the sea.

The spill was only the 34th largest ever recorded, but the timing, the remote location and the abundant wildlife combined to make a particularly disastrous combination. Wildlife deaths were enormous – a quarter of a million sea birds alone. Of the 23 species injured by the spill, only two were declared fully “recovered” 10 years later.

Exxon was fined $150 million, the largest fine ever imposed for an environmental crime. The court forgave $125 million of the fine in recognition of Exxon’s cooperation in clearing up the spill and settling private claims. Exxon also agreed to pay $100 million in restitution for injuries caused to wildlife and $900 million over 10 years as part of the civil settlement.

Some say that BP was in fact more to blame for the accident than Exxon, the owner of the ship. BP after all had the controlling interest in the Alaska Pipeline System. But it was Exxon that had its name on the tanker and the Exxon brand that suffered the fallout.

The bigger picture

Catastrophic oil spills like this are only the tip of the iceberg as far as the environment is concerned. A statement made by the UN Environment Program in 1997 said that “from a global perspective, the environment has continued to degrade during the past decade, and significant environmental problems remain deeply embedded in the socio-economic fabric of nations in all regions.”

Global corporations, many of them brand owners, have undeniably contributed to today’s environmental problems. Oil companies are not alone, though the activities of drilling and refining can cause particular damage. Royal Dutch/Shell, for example, has notoriously been implicated in the devastation of the Niger River delta and General Electric is waging a defensive campaign to avoid cleaning up the Hudson River in New York after years of dumping harmful waste into the river.

What are brand owners doing?

Brand owners are however also well placed to help solve some of the problems created by an industrial society. And consumer research suggests that we think that they should be helping. In 1999, Environics polled more than 25,000 people in 23 countries and found that 90% wanted companies to focus on more than just profitability. And many other studies back this up.

Half of all Americans have switched product brands after learning that the product, its packaging or its manufacturer harmed the environment – and they could name the product, a further survey shows. It is not just abuse of the environment that worries consumers – in Canada Nike lost 30% of its sales within two months after the company’s use of child labor was exposed.

Some critics argue that multinational companies, particularly owners of famous consumer brands, should be compelled by law to do more. It is the large organisations that have the money, the people and the resources to develop new, environmentally benign manufacturing techniques. And it is their brand image that will suffer most by ignoring environmental and social concerns. Certainly, in recent years, many global brand owners have become aware of the need to take their environmental responsibilities seriously. The late Robert Goizueta, CEO of Coke, argued that “businesses have an obligation to give something back to the communities that support them.”

The language of responsibility

A whole new language has been born – corporate social responsibility, corporate ethics, corporate citizenship – all terms coined to express the same thing.

McDonald’s, for instance, often proclaims itself a company with a strong sense of corporate responsibility. Last year, the company received a WasteWise Partner of the Year Award from the US Environmental Protection Agency in recognition of its ongoing commitment to solid waste reduction. The company also makes charitable contributions of around US$10 million a year, principally to its own Ronald McDonald House Charities, which provide both educational and healthcare services to children in need.

But McDonald’s was also the subject of the infamous McLibel trial. This action was sparked by a factsheet distributed by two activists who accused the corporation of, among other things, being responsible for starvation in developing countries and destroying large areas of rainforest. The company was broadly exonerated from these charges, although others were upheld. Critics of McDonald’s have even given us the expression McJob – a job with low wages, low status and no benefits.

In fact environmental activists would say that much of the brand owners’ talk is only hot air. CorporateWatch, the web-based environmental agency, puts it extremely strongly: “Today’s corporate environmentalism is to the ecological and social crises of globalisation what a Band-Aid is to a gaping wound.”

Facing up or covering up?

To counter such accusations, brand owners have started to produce Environmental Reviews and Statements of Corporate Social Responsibility. Ford, for example, cites among its initiatives environmentally friendly vehicles and cleaner manufacturing practices. Their website declares: “We are the only automotive company to meet tough environmental standards for all its plants…. And while we are proud of these achievements, we know it’s not enough.”

The CEO of Monsanto, a company that has been in the limelight for its promotion of genetically modified crops, stated in his 1999/2000 letter: “While solving the bigger problem of environmental degradation and meeting human needs will take the efforts of all society, I personally believe that we at Monsanto can make a significant contribution.”

Critics claim that this is only so much “greenwash” and point to Monsanto’s massive lobbying efforts to control regulations depending on their own needs. Brand owners, however, would argue that they are not trying to cover up anything – but merely telling their stakeholders about the efforts they are making to look after the world and the people around them.

The challenges ahead

Jeffrey Garten, Dean of Yale’s School of Management, thinks that advocacy groups will increasingly target multinational companies. As a result, global companies will face more scrutiny of environmental policies, employment practices and investments. Big brand owners are the easiest targets of all – people know their names, buy their products, and feel cheated when they find out truths that might seem unsavoury.

Today, whatever companies do, whether good or bad, is immediately known around the world. Consumers increasingly want to know what’s behind the brands they buy. In this context, therefore, it could be argued that corporate social responsibility has become a must have, not an optional extra. Perhaps taking care of the environment and each other will turn out to be the best brand investment that a company can make.