Reposted by the Institute for Energy Research
BY ROBERT L. BRADLEY, JR.
DECEMBER 15, 2020
Corporate Social Responsibility (CSR)… Stakeholder Theory… Sustainability… Environmental, Social and Governance Investments (ESG). Whatever the term, the premise is that corporations are both a cultural and a “market failure” and therefore need to be socially regulated in addition to government regulation.
During the time of climate alarmism, CSR and ESG focused intensely on energy companies. The term ESG is new, adding to traditional concerns about resource scarcity and employment diversity, climate change and social justice.
In a revealing way, the corporate treasure trove of this movement – Enron in the 1990s and BP afterwards – proved anything but good corporate citizens. Enron’s system failure cost tens of thousands of jobs and discredited capitalism. BP’s blowing out of Deepwater Horizon resulted in nearly $ 70 billion in cleanup charges, fines and other charges in addition to manslaughter.
Now that the past has been forgotten, a new generation of companies under ESG pressure is emerging, some for a second act (BP). Reservation Emptor.
“Green” Enron
Do you remember Enron? Ken Lay’s Colossus was the first large US company to beat the air drum (1988) and invest heavily in solar panels and wind turbines. In fact, Enron revived the dormant solar industry in 1995 and the struggling wind industry in 1997. (The story can be found in my 2018 paper, “The Economic Decline and Political Rise of Renewable Energy.”)
In the fall of 2001, Ken Lay set the tone for Enron’s final environmental, health and safety management conference:
We believe that incorporating environmental and social aspects into risk management, managing our projects and developing products and services will help us maintain our competitive advantage. In the future, we will use our intellectual capital and innovation to promote sustainable business practices around the world.
At this meeting, Enron’s CSR (Corporate Social Responsibility) task force listed the successes to date.
- Assured supervision of social / ecological performance
- Express support for the Universal Declaration of Human Rights
- Corporate Responsibility Task Force completed
- Developed and pilot-tested human rights audit
- Development of security and human rights guidelines
- Established formal partnerships with WBCSD [World Business Council on Sustainable Development], IBLF [International Business Leaders Forum]and CI [Conservation International]
- Identified language to strengthen the code of ethics
- Project support – Calypso, Transredes, Dabhol and Cuiabá
- Ongoing response to stakeholder concerns
The goals for 2002 were:
- Formally adopt CERES principles
- Complete indigenous peoples policy
- Include social / environmental expectations in formal relationships with vendors and contractors
- Review the results of the stakeholder survey and develop a strategy to address the result
- Raising awareness of social / ecological trends below [Enron’s] Origin and Investment Groups
- Add the Corporate Responsibility performance attribute to the PRC [Performance Review Committee] process
- Present to Dr. Lay and the senior management recommendations of the task force
Enron’s CSR was about being everyone’s favorite company – and helping to monetize its “green” energy investments (seven profit centers in total). It ended in December 2001 when Enron went down for money and time with the green lights on.
BP “environmental protection”
Do you remember “Beyond Petroleum” BP? The then boss John Browne bought his way into the climate alarm in a speech in 1997 and, despite a fortuitous purchase from Amoco, shut down his company with the help of his successor Tony Hayward the next year. One group of environmental issues (BP was more interested in climate imaging than ground safety) culminated in the avoidable blowout of Deepwater Horizon in May 2010.
BP, the left’s most popular energy company (like Enron before it), became Exhibit A against offshore drilling and fossil fuels in general. The crowd of “sustainability” was embarrassed again. “Oops:” Socially responsible “funds hold large stakes in BP,” said a Wall Street Journal article at the time. And in his piece Beyond Pathetic, Andrew Wilson noted:
With large lumps of oil on the bank, it’s almost weird – no, it’s weird – to see some of BP’s former friends in science and other centers of high-mindedness take cover. To take an example, thanks to BP sponsorship, 300 researchers in white lab coats in Berkeley are diligently looking for ways to produce environmentally friendly fuels that reduce our reliance on oil. In 2007, BP founded the Energy Biosciences Institute and announced that it would spend $ 500 million over the next decade supporting research on vegetable fuels at Berkeley and two other universities. This is the largest corporate donation ever made for university research.
Biofuel for transportation instead of gasoline and diesel? The once powerful Exxon Mobil has since taken this path. The hoped-for “fuel of the future”, politically correct, economically incorrect, was criticized from all sides.
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At BP, “big promises” have replaced “beyond petroleum”. New CEO Bernard Looney talks a lot about CO2 emissions (CO2) by 2050. (“The global carbon budget is limited and is running out quickly,” he explains.)
For an oil and gas company, this seems somewhere between fanciful and bizarre. For environmentalists, it’s greenwashing. For consumers, this is an unnecessary business expense. For shareholders, this is a warning sign of a distracted company.
Real corporate responsibility
“I have never known much good of those affected by acting for the public good,” wrote Adam Smith in the 18th century. “It is indeed a nuisance that is not very common among merchants, and every few words must be used to dissuade them.”
“The two greatest enemies of free enterprise in the United States,” Milton Friedman once said, “were on the one hand my intellectual colleagues and on the other hand this country’s businesses.”
Centuries apart, Smith and Friedman fingered the counter-capitalist business models of Enron, BP, and other companies based on fads, misdirection, and political favor. What is now called ESG (Environmental, Social and Governance Investing) is old vinegar in new bottles.
Conclusion
Corporations are not and cannot be governments or non-profit organizations. For-profit companies are wealth creators in the field of mutually beneficial exchange and not arbiter of controversial ideologies. Carbon-based energy suppliers should not pretend to be different at the expense of consumers and / or owners.
America benefits from the largely market-based energy policy. Energy dominance should not be affected by the ESG, let alone government intervention in the coming years.
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