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Case 8 Lecture Notes

BP Struggles to Repair Its Tarnished Reputation

Case 8 BP Struggles to Repair Its Tarnished Reputation*

Synopsis: In the wake of the Deepwater Horizon disaster in the Gulf of Mexico, BP faces a

monumental task in reestablishing its sustainability-based branding strategy and

repairing its tarnished reputation. This case examines the history of BP, its efforts

to rebrand the company to focus on sustainability, and its environmental and

ethical lapses preceding the Deepwater Horizon accident. BP had realized the

need to become more environmentally responsible and was the first energy

company to recognize the presence of global warming and launch initiatives to

produce cleaner forms of energy. Unfortunately, the company’s questionable

safety and environmental record effectively undermined its branding initiatives.

To move beyond the Gulf oil spill, BP must find ways to repair its damaged

reputation through a commitment to integrity and an authentic concern for both

the environment and the company’s many stakeholders.

Themes: Ethics and social responsibility, sustainability, corporate branding and

positioning, corporate affairs, stakeholder engagement, strategic thrust

Case Summary

BP has experienced a lot of ups and downs over its hundred-year history—from nearly

bankrupting its founder William D’Arcy to becoming one of the world’s largest energy

companies. BP has also experienced its fair share of controversies regarding business practices,

environmental damage, hazards to workers, and greenhouse gases. For some time, BP has

attempted to turn a page in its history book toward a more environmentally friendly future

through investments in renewable energy and ethics initiatives. British Petroleum changed its

name to BP and then tried to rebrand itself as Beyond Petroleum. This rebranding was a signal to

stakeholders that it was focused on sustainability and the need to move beyond nonrenewable

energy sources.

Changes in demand patterns for energy products require that firms respond to the value desired

by a target market. BP was trying to position its products as not just commodities, but as

differentiated products that support sustainability and other social responsibility concerns. One of

the key concerns when such claims are made involves maintaining a product that is authentic and

trustworthy. By using the Beyond Petroleum positioning, BP presented itself as being committed

to investing in renewable energy, which has gained a great deal of popularity among consumers

and other members of society concerned about the planet’s future. A marketing strategy has to be

built on a solid foundation of supportable claims about the true nature of the product. However,

BP’s efforts backfired on April 20, 2010 when the explosion of the Deepwater Horizon oil rig,

operated under the oversight of BP, created one of the greatest offshore oil disasters in history.

Case 8 Lecture Notes

BP Struggles to Repair Its Tarnished Reputation

This case provides an opportunity to observe the past efforts of BP to improve its image, along

with how these efforts were eclipsed by the oil spill. Certain disasters resulting from company

negligence are detailed in this analysis, and although BP made efforts to establish itself as a

socially responsible company, the recent oil spill crisis undid many of BP’s marketing initiatives.

While BP has experienced other disasters related to its social responsibility, before the 2010 oil

spill, BP was garnering a better reputation as a socially responsible oil company. It became the

first oil company to recognize the presence of global warming and to launch initiatives to

produce cleaner forms of energy. This one disaster has tainted BP’s brand image, causing the

company to lose billions of dollars and the reputation it worked so hard to build.

Teaching Overview

In teaching this case, a major theme has to be BP’s rebranding efforts and how the company

must strive to repair its damaged reputation in the wake of the Deepwater Horizon incident.

While BP is not the only major energy company to suffer a reputational crisis, BP did realize

more quickly than other companies that being perceived as an environmentally concerned energy

company is far better for business than being seen as a big, dirty oil company. In 2005, BP was

the first company in its industry to publicly state that climate change is real, and that it presents a

dilemma for oil companies. Around the same time BP also launched its Alternative Energy

division, which is devoted to renewable energy sources. Another important element in BP’s

rebranding was its Code of Conduct—titled “Our Commitment to Integrity”—which gives legal

expectations in five key areas: (1) health, safety, security, and the environment, (2) employees,

(3) business partners, (4) government and communities, and (5) company assets and financial

integrity.

Any headway that BP was making in its rebranding efforts came to an abrupt end on April 20,

2010. The findings from the resulting investigation revealed that BP cut short procedures and

quality testing of the drilling equipment and pipes. A government panel investigating the crisis

also concluded that BP, Transocean, and Halliburton—some of the major firms involved in the

drilling—failed to adequately consider risks or communicate with one another on major

decisions involving the well.

SWOT Analysis

Internal Strengths

• Strong commitment to improving its corporate reputation

Internal Weaknesses

• Weak risk management strategies

Case 8 Lecture Notes

BP Struggles to Repair Its Tarnished Reputation

• Past ethical violations still tarnish BP’s image

• Current and new efforts to improve image may seem somewhat disingenuous

• The company earns an enormous profit each year, causing some to think BP is greedy

External Opportunities

• Strong market demand for renewable energy sources

External Threats

• Competitors are developing strong renewable energy programs of their own

Problem/Decision Statement

The damage to BP’s Beyond Petroleum marketing strategy is not easy to repair. The

development of trust is based on a firm’s commitment to integrity, transparency, and a concern

for all stakeholders. Now, BP needs to develop a marketing strategy that begins to repair the

damage caused by the Deepwater Horizon incident. BP also needs to develop a strategy that is

seen as authentic in the face of the socially responsible corporation that it claims to be.

Strategy Alternatives/Strategy Recommendations

Students will be hard pressed to develop strategic initiatives that are better than those currently

used by BP. Many students will argue that the company needs to do more of the same, such as

doubling its commitment to renewable energy. Some students will suggest that BP drop certain

Implementation Issues

Without a doubt, the most critical implementation issue is the continuing commitment of BP’s

leadership team. The current team understands the issues and the need to improve the company’s

Case 8 Lecture Notes

BP Struggles to Repair Its Tarnished Reputation

Teaching Questions

1. Analyze BP’s efforts to improve sustainability and its reputation prior to the Deepwater

Horizon disaster. Was the company on the right track? Why or why not?

Sustainability can be a tricky concept to nail down, with every individual and corporation

supplying a meaning that best serves their purpose. A good working definition of

2. Because most BP products can be viewed as commodities, do you think consumers will

avoid purchasing from BP because of its track record and the Deepwater Horizon

disaster? Why or why not?

3. How can BP prove to its stakeholders that it is serious about social responsibility,

sustainability, and ethics, and that its efforts are not just a public relations ploy? What

strategic issues would you focus on in trying to repair the company’s reputation?

Although actions speak much louder than words or money, one way for BP to prove its

seriousness is to significantly increase its investment in these areas. The company