Health, Safety, Security and the Environment - a driver of business value in the 21st century
Speaker: Greg Coleman
Speech date: 19 September 2005
Venue: SPE Conference on HSE, Kuala Lumpur
Title: Group Vice President Health Safety & Environment
Speech date: 19 September 2005
Venue: SPE Conference on HSE, Kuala Lumpur
Title: Group Vice President Health Safety & Environment
Introduction
Good morning everyone. It’s good to be here among so many HSE professionals – or ‘HSSE’ as we call it in BP, with the extra ‘S’ for security. I appreciate the opportunity to speak to you this morning.This has been a very tough year for many of us, and especially for BP. In particular, we experienced the worst disaster in our recent history at Texas City Refinery in March when 15 people lost their lives and many more were injured in an explosion and fire.
It has also been a year when we – and many others - have had to contend with the hurricanes in the Gulf of Mexico.
And the year of course started with the efforts to provide relief after the tsunami that cost so many lives.
BP’s emergency response centre for the tsunami was here in Kuala Lumpur. And here we saw a remarkable example of cross-industry co-operation. This occurred with the mobilization of a Hercules aircraft that is kept available for oil spill response by East Asia Response Limited, or EARL, a business run by oil and gas companies operating in Asia.
The Hercules had a vital role to play as it could fly closer to the disaster zone in Bander Aceh than the international aircraft ferrying the aid into Bataan. Releasing the aircraft from its oil spill obligations meant getting agreement from all 26 of EARL’s member companies. However, we got that agreement quickly and the aircraft flew relief missions for four weeks, funded by ourselves and other EARL members.
So at the start of this conference I think it is worth acknowledging the tremendous power of partnership in this industry. That power is symbolized by the people in this room – and indeed by the work of the SPE.
The SPE is an organisation that BP is proud to belong to. No less than 1600 BP employees are members of the SPE and 400 of them have held positions with the Society. Our people have written nearly 3000 SPE papers and every year we download around 15,000 papers from the e-library. This doesn’t happen because our people like reading papers. It happens because they are working on major projects and the SPE’s papers are very practical and relevant.
In a year like this one, there is often little time to reflect, but in collecting my thoughts for this talk I felt that the overwhelming lesson of the year for HSSE was simply the enormous significance of what we do, not only for business, but for the wider world.
We deal with matters of life and death. Prevention, of course, is our key word, but we also handle emergencies, crises and disasters. We take the lead in learning the lessons when things go wrong. And the issues we deal with have a major impact on our organisations’ reputation and value.
We don’t undertake our work primarily for commercial motives. But nonetheless our work has significant commercial benefits. This is what I mean by HSSE being a ‘driver of value’. I am a strong believer that if we get HSSE right – for the sake of our people and the communities we serve – then we will also get things right for our shareholders.
And as HSSE is critical for value then it needs to be recognised and resourced as such. And if I have one message today, it is that HSSE is not an overhead. It’s an investment.
In a year like this one, there is often little time to reflect, but in collecting my thoughts for this talk I felt that the overwhelming lesson of the year for HSSE was simply the enormous significance of what we do, not only for business, but for the wider world.
We deal with matters of life and death. Prevention, of course, is our key word, but we also handle emergencies, crises and disasters. We take the lead in learning the lessons when things go wrong. And the issues we deal with have a major impact on our organisations’ reputation and value.
We don’t undertake our work primarily for commercial motives. But nonetheless our work has significant commercial benefits. This is what I mean by HSSE being a ‘driver of value’. I am a strong believer that if we get HSSE right – for the sake of our people and the communities we serve – then we will also get things right for our shareholders.
And as HSSE is critical for value then it needs to be recognised and resourced as such. And if I have one message today, it is that HSSE is not an overhead. It’s an investment.
And don’t just take my word for it. Ask Goldman Sachs. Last month they issued a report called Sustainable Investing in the Energy Sector which argued that there is a clear link between leadership on environmental, social and governance issues and the ability of companies to deliver new legacy assets. A previous report was simply called Environmental and Social Issues Count and wasn’t then able to make as strong case for the connection to value.
One important way in which environmental and social issues count is in the battle for talent. In BP we have an aspiration to have ‘no accidents, no harm to people, and no damage to the environment’. And this appears to strike a chord with the values of people who come to work for us. For example, every year our internal Helios awards programme attracts hundreds of entries on HSSE issues.
So in my view there is a very clear connection between having values – meaning principles - and creating value – meaning returns.
Unfortunately, many people do not seem to recognise that business can have values. In a recent survey by Globescan, 65% of people said they trusted NGOs. 59% trusted the UN. 53% trusted governments. But just 42% trusted large global companies.
I think one way to improve that rating is to tell our story more confidently. Energy has been essential to the world’s development over the past century, with its higher life expectancy and living standards. The fundamental purpose of our industry is to provide high-quality, reliable energy to meet the needs of world’s 6.5 billion people, and doing more to benefit the 2 billion people who survive on less than $2 a day and who desperately need what we produce. Sometimes I think we need to remember we are doing something good for the world and we should be proud of it.
So let me look at a few aspects of health, safety, security and environmental management and how they have an impact on value.
One important way in which environmental and social issues count is in the battle for talent. In BP we have an aspiration to have ‘no accidents, no harm to people, and no damage to the environment’. And this appears to strike a chord with the values of people who come to work for us. For example, every year our internal Helios awards programme attracts hundreds of entries on HSSE issues.
So in my view there is a very clear connection between having values – meaning principles - and creating value – meaning returns.
Unfortunately, many people do not seem to recognise that business can have values. In a recent survey by Globescan, 65% of people said they trusted NGOs. 59% trusted the UN. 53% trusted governments. But just 42% trusted large global companies.
I think one way to improve that rating is to tell our story more confidently. Energy has been essential to the world’s development over the past century, with its higher life expectancy and living standards. The fundamental purpose of our industry is to provide high-quality, reliable energy to meet the needs of world’s 6.5 billion people, and doing more to benefit the 2 billion people who survive on less than $2 a day and who desperately need what we produce. Sometimes I think we need to remember we are doing something good for the world and we should be proud of it.
So let me look at a few aspects of health, safety, security and environmental management and how they have an impact on value.
2.1 Safety
TXC - I’ll start with safety. And before making more general comments let me tell you what I can about our ongoing response to the Texas City tragedy.Essentially, we have responded in the only way we can – by accepting responsibility, doing what we can for the bereaved and injured, and conducting a detailed investigation in order to understand what went wrong and to prevent such a thing ever happening again.
We will shortly be publishing the results of the full root cause investigation which will identify systemic issues that lay behind that situation.
The incident has caused us to examine our working practices and to review a wide range of procedures – from ensuring correct practices are followed in control rooms to when people should sound alarms.
We have been implementing a series of recommendations to address the immediate causes identified in the interim report of the investigation. For example, on a very practical level, a program is underway to move all trailers and temporary accommodation out of areas of refineries containing hydrocarbons where major accident risks exist. And we have initiated a program to replace all of the blow-down stacks of the type involved in the discharge that led to the explosion at Texas City. These are substantial programs – around half a billion dollars of investment in total – and they are intended not only to prevent another such incident, but to move us to a new level of safety practice.
Texas City was a shocking reminder of our own fallibility. But we also have to maintain our perspective in order to retain the confidence of our people and the communities where we work. This one terrible event does not invalidate the achievements of thousands of people day by day around the world.
Indeed, in BP, the fatality trend had been falling until this year. And our injury rate, measured in days away from work case frequency, has gone down from around 1.5 cases per 200,000 working hours in 1988 to 0.08 in 2004.
In Exploration and Production, safety performance has improved by 80% over the last 5 years. If we were working to the performance standards of 1999, then 6500 more recordable injuries would have occurred since that date. This is a tribute to the work that has been done by thousands of people to embed our safety values, standards, rules, and systems.
And of course this trend is not confined to BP. The latest figures from the International Association of Oil & Gas Producers show that the fatal accident rate in the global E&P industry has virtually halved since 1995 and the lost time injury rate has fallen from over three per million hours worked in 1995 to around one last year.
A particular concern for BP in the last 2 years has been driving. The problem was brought home in 2003 when 20 people died while working as employees or contractors for BP and 14 of those deaths involved vehicles. And out of 31 fatalities among members of the public in incidents related to our activities, 28 were transport-related.
Indeed, in BP, the fatality trend had been falling until this year. And our injury rate, measured in days away from work case frequency, has gone down from around 1.5 cases per 200,000 working hours in 1988 to 0.08 in 2004.
In Exploration and Production, safety performance has improved by 80% over the last 5 years. If we were working to the performance standards of 1999, then 6500 more recordable injuries would have occurred since that date. This is a tribute to the work that has been done by thousands of people to embed our safety values, standards, rules, and systems.
And of course this trend is not confined to BP. The latest figures from the International Association of Oil & Gas Producers show that the fatal accident rate in the global E&P industry has virtually halved since 1995 and the lost time injury rate has fallen from over three per million hours worked in 1995 to around one last year.
A particular concern for BP in the last 2 years has been driving. The problem was brought home in 2003 when 20 people died while working as employees or contractors for BP and 14 of those deaths involved vehicles. And out of 31 fatalities among members of the public in incidents related to our activities, 28 were transport-related.
2.3 Health
In health, like security, our work begins with our own people, but it extends outwards into communities, where it will inevitably affect perceptions of our business. BP actively participates in the Global Business Coalition on HIV/AIDS as one of 250 corporations world wide. Our initial programmes to address HIV/AIDS were focused on our workforce – promoting tolerance, respect, education, support and treatment. Our experience has naturally led us to extend our activities to families and then to communities. To take the example of Papua again, there we are working with NGOs in a five year care and prevention programme.
Like many companies, we are also taking measures to prepare for an influenza pandemic. The World Health Organisation, the US Center for Disease Control and world experts advise that it is a case of “when” not “if”.
As a result we developed a global driving standard - with assistance from external experts – setting out what is expected of BP drivers and their vehicles. For example, this stipulates that no driver will ever use a mobile phone while driving, even ‘hands-free’ and that all BP drivers and their passengers will wear seat-belts, even if they are not required by local laws. The standard has been publicized and implemented right across BP’s operations in 100 countries, with videos, workshops and training packages. And in 2004, workforce fatalities linked to driving fell from 14 to 4.
Another area in which we are making progress is preventing tanker rollovers, which typically costs over $ 1 million per incident. After one particularly bad period we took action and found that the immediate causes included driving too fast and fatigue. The root causes included inadequate training and management. We responded by calling a time-out to raise awareness and arrange training. And in the subsequent two years we nearly halved the number of rollovers.
We’re also seeing signs that we are becoming known for our road safety standards. In China for example, one of our employees got into a taxi and put on her seatbelt. The taxi driver said “I expect you work for BP.” What better brand recognition could you ask for?
Another area in which we are making progress is preventing tanker rollovers, which typically costs over $ 1 million per incident. After one particularly bad period we took action and found that the immediate causes included driving too fast and fatigue. The root causes included inadequate training and management. We responded by calling a time-out to raise awareness and arrange training. And in the subsequent two years we nearly halved the number of rollovers.
We’re also seeing signs that we are becoming known for our road safety standards. In China for example, one of our employees got into a taxi and put on her seatbelt. The taxi driver said “I expect you work for BP.” What better brand recognition could you ask for?
2.2 Security
Moving onto security, this is also about keeping people safe, but it also involves protecting sites and pipelines - and that that can enhance or damage value, depending on how sensitively we carry it out.Over the past decade we have learned a lot in this area. In particular we worked with governments, companies and NGOs to draw up the Voluntary Principles on Security and Human Rights for the extractive industries. One place where we have applied these principles is Papua, Indonesia, where we have created a community based security programme which has won the support of local officials, the police, the military, and the Ministry of Defence. And incidentally, our Indonesia Business Unit leader, Anne Drinkwater, will be speaking at one of the sessions this afternoon.
To address this threat, it is critical to undertake preparedness planning in assessing and minimizing risks. For example, building on the experience from the SARS outbreak in 2003, we are requesting that our businesses review their Business Continuity Plans so we can develop a suitable approach across the region.
2.4 Environment
Finally, the ‘E’ of HSSE. Can what is good for the environment also be good for value? In our experience the answer is a definite ‘yes’.2.4.1 Green fuel
One of the clearest examples is the success of a premium fuel called BP Ultimate which can increase fuel efficiency as well as generating lower emissions of carbon monoxide and nitrogen oxides than standard fuels. In the first half of this year, nearly 1.5 billion litres of Ultimate were sold in Europe alone, a 70% volume increase on the same period last year.2.4.2 Climate
A more complex example is the way we address the major environmental issue of climate change. As you know, BP acknowledges the weight of the scientific evidence and accepts the need for precautionary action on this issue.In the initial stages of our action, we cut greenhouse gas emissions by about 10% through energy efficiency projects and reductions in flaring and venting. And by doing so we generated around $650m of net present value.
Now the stakes are higher. There is continuous debate over the way ahead. Emission trading schemes are underway. Governments are considering new ways to stimulate lower carbon solutions.
The Goldman Sachs report I mentioned earlier identified the companies with potential for creating significant value as those with the most strategic options available for a low-carbon world.
In BP we have sought to develop a number of options as well as an overarching view of the challenge. We believe the key goal is to bring greenhouse gas emissions back to today’s level of around 25 billion tonnes of CO2 equivalent a year by 2050, despite a projected doubling of energy consumption. That leads us into developing solutions that can help to deliver such a reduction. For example, we have increased our sales of natural gas by nearly 50% in three years. We are building scale in our solar business. We are conducting a large-scale trial of carbon dioxide capture and storage at a major upstream gas plant in Algeria and we have set out plans for the world’s first gas-fired hydrogen power station incorporating carbon dioxide capture and storage using depleted reservoirs in the North Sea.
2.4.3 Helping individual countries address climate change
Here in Malaysia we have become the first partner in a project called ‘mobilizing Malaysia on climate change’ with the Centre for Environment, Technology and Development. This has involved us in raising awareness and in showing that efficiency can reduce both emissions and costs. Our petrochemical plant at Kuantan has reduced its total energy cost by 10%, saving 16.8 million ringett – or around $4.5m - per annum.Incidentally let me add that I am delighted to be in Malaysia today. This is a country where BP has had a long successful history. We have capital employed of around $500m, and our business includes four major petrochemical plants and a lubricants business with a market share of 32%. Here we are a local company as well as a global one with over 800 staff who are 97% Malaysian.
I’m also very pleased that our HSSE performance here has been recognised. BP Petronas Acetyls last year gained the Overall Winner’s Platinum Award in the Chemical Industries Council’s Responsible Care Awards. And both of our chemicals businesses have held the Prime Minister's Hibiscus Award – the premier environmental award in Malaysia.
In China too, we are making an increasing contribution to the search for environmental sustainability. In Guangdong province, for example, we are the only foreign partner in building a liquefied natural gas terminal and trunk-line project, offering a lower carbon alternative to coal. We are also supporting a project at Tsinghua University that is investigating sustainable urban mobility for China.
2.4.2 Sensitive Areas
Let me mention one final important environmental issue – that of working in sensitive and protected areas. This is becoming an increasingly important issue as the search for energy resources takes our industry into remote areas that are rich in biodiversity. Access to such areas is of course a decision for governments. Once the decision it is critical that we work in such areas in a way that it acceptable to broader society.It is important that we have a transparent and rigorous approach and this is why over the past year we have created a set of global Environmental Stewardship Principles which are now being tested prior to full roll-out next year. These affect the way we carry out Environmental Impact Assessments and the way we build those assessments into environmental management. The most important new feature is a very early screening process that will normally take place well before any physical activity.
These principles will be applicable to Marine Protected Areas – MPAs - which are currently being given much attention - and are relevant to BP as our strategy is weighted to offshore areas. We are helping to develop a multi-company research program into MPAs through IPIECA and OGP and we are involved in monitoring marine mammals at sites in Indonesia, Angola, the Gulf of Mexico, Sakhalin and Alaska.
Conclusion
So while HSSE is first and foremost about keeping people and places safe, secure and healthy, it is also a major driver of value.If we are seen simply to be complying with the laws, no more, then we will simply be recognised as compliant, no more.
If we go beyond compliance to set out own global benchmarks, then I think we will be respected.
But if we step out to take a lead – in other words if we set new benchmarks in HSSE performance, then - because these issues are vital to society - we will be actively rewarded. We will attract and satisfy customers, investors, partners, governments, employees and shareholders.
So, to conclude, I have given you some tangible examples to show that good HSSE creates value. Value is of course monetary – but it is also about life and people – and we value those much more than money.
I want to finish by challenging everyone here to consider both the impact on people and financial value in every recommendation you make to your companies.
And while we discuss ‘HSSE’ – or ‘HSE’ - this familiar business acronym, let’s keep remembering how much these issues mean to the world beyond our businesses.
What could the world possibly value more than its health, its safety, its security and its environment?
They’re critical issues. And they are our issues. That’s why what we do matters. And that’s why we’re here. So thank you and I hope you have a really productive conference.
