Reactions to a legitimacy-threatening incident happening to a competitor : oil and gas industry : the effect of BP's oil spill in the Gulf of Mexico

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MSc Accountancy & Control ( variant Control)

Faculty of Economic and Business, University of Amsterdam

Master's thesis:

Reactions to a legitimacy-threatening incident

happening to a competitor: Oil & Gas Industry

The effect of BP's oil spill in the Gulf of Mexico

Author: Ramin Kakar Date: 17 August 2015 Student number: 10592814

Thesis supervisor: drs. R.W.J. van Loon RA

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Statement of Originality

This document is written by student Ramin Kakar who declares to take full

responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those

mentioned in the text and its references have been used in creating it.The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Preface

This thesis was a very instructive and enjoyable experience for me. At the same time it forms the last part of my master's study for Accountancy & Control at the University of Amsterdam (UvA)

.

Thanks to this research I have been able to extend my knowledge in the SAE field of the oil & gas industry. This is exactly the field where I wish to work as a professional in the near future. It took almost 8 months to finalize this thesis and it was not always easy as I was working and writing the thesis at the same time. In the end, I am very satisfied with the result and I truly hope that this study will contribute to existing literature in the SAE field.

The University of Amsterdam made it possible for me to conduct this research and to write this report as they have provided the facilities and opportunity to access relevant data. Furthermore, I would like to thank in particular drs. R.W.J. (Ron) van Loon RA for his help and guidance during the process of writing this thesis. Also, I would like to thank my colleague Olivier Amirault (MSc) for his critical point of view and help with developing the research proposal. Finally, and most important, my greatest thanks goes to my family for their endless support and patience throughout this study.

Ramin Kakar

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Abstract

This paper analyses the reaction of the five major competitors of BP after the oil spill disaster (legitimacy-threating incident) in the Gulf of Mexico. According to Petten (1992), an environmental incident can damage the legitimacy of a whole industry, not only that of the perpetrator. This report aims to understand disclosures patterns and legitimacy strategies used by oil super majors as a reaction to BP's oil spill in the Gulf of Mexico in 2010.

The paper focuses on two issues: the change in the CSR disclosures between 2009 (before the crisis) and 2010 (after the crisis). The changes in the CSR disclosures were tested using the legitimacy theories (conform, selection and manipulation). This research was conducted by applying content analysis by method of sentence count in the CSR reports.

The companies all increased their CSR disclosures, with positive disclosures increasing most. The conform strategy was the most used by super majors as they want to conform to the social expectations and demands of the public. By promoting their choice for more clean and sustainable energy, the majors applied the selection strategy. There was no evidence found that the super major were using the

manipulation strategy in their CSR disclosures.

To conclude, based on the legitimacy theory framework the companies felt a need to increase their disclosure after the incident to show their relevant publics that they were committed to help restore any damage and prevent future disasters.

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1. Introduction

On April 20th 2010, an explosion and fire occurred on the Deepwater Horizon oil-drilling rig not far from the coast of Louisiana, which eventually sank the rig two days later (BP, 2010). According to BP, 3.19 million barrels of oil were discharged into the Gulf of Mexico, but the federal government of the US estimated that 4.2 million barrels of oil spilled into the Gulf (CNN, 2015). Different parties are still disputing about the exact amount of leaked oil. The explosion killed 11 people, seriously injured 17 and caused permanent ecological, environmental and economic destruction to the Gulf of Mexico area (Gore 2010).

This thesis investigates and explores the reactions of oil & gas multinationals — BP, Total, Shell, ExxonMobil, Chevron, and ConocoPhillips— after a legitimacy-threatening incident happening to a competitor. This study will specifically focus on the reactions of competitors after Deepwater Horizon. The study of Deegan & Rankin (1996) concludes that the companies with bad environmental news have been shown to react by ignoring the negative and disclosing more positive environmental information. The paper of Petten (1992) looks at changes in

environmental disclosures after the Exxon Valdez oil spill in 1989. The author found that the companiesthroughout the oil & gas industry increased their environmental disclosures after this accident.

More than twenty years later, this paper will assess the reactions of oil & gas multinationals (hereafter, super majors) to BP’s oil spill incident. Even though in the last two decades Corporate Social Responsibility (hereafter, CSR) reports have become an important tool for organizations to legitimize themselves in society, this paper will also assess which legitimacy strategies, based on Suchman's work (1995), super majors apply to save, maintain or repair their legitimacy.

This chapter starts with the background; it will outline what is already known in the recent academic literature about this subject. Subsequently, the motivation,

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research question and the contribution of this study to academic world will be discussed. Finally, the thesis structure will be explained.

1.1 Background

Over the last fifty years, the super majors have been continually criticised for being monopolistic, taking 'obscene profits' during oil crises and causing accidents with devastating consequences for local environments and humans (Skjærseth et.al, 2004). S. Muralidharan et al. (2011) state that all major oil companies have an aura of negativity due to the historic abuses of big oil or simply negative opinions about large corporations. Since the disaster with Exxon Valdez, the issue of the oil

industry’s corporate environmental responsibility has gained worldwide importance (Patten, 1992). According to Babatunde (2005), there is increasing evidence that the oil & gas industry’s operations have a negative impact on the environment and human beings. The global natural resources dependency can be blamed for increasing demand for oil & gas products. Even though the majority of the world's oil and gas fields are found and explored in developing countries like Venezuela and Nigeria (Radler, 2003), the technical and financial expertise which is needed to explore these fields are in the hands of western oil organizations. As a result of this, politics and oil business have acquired global importance (Gazprom, US invasion in Iraq). Watts (2005) identifies in his study ‘’oil complex’’ a number of non-technical factors which making the oil business complicated and challenging:

• Environmental and Health rights • Corruption and Fraud

• Transparency, accountability and oversight • Indigenous Rights and the Land Question • Business in war

• Militarization, Security, Militia, and Human Rights Violations • Community Development and Stakeholders’ Rights

• Oil Theft and Organized Crime • Fiduciary and Financial Irregularities

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• Worker and Labor Rights

Work in the energy industry is technically very complex, as oil and gas are becoming more and more scarce. Consequently, companies are using unconventional methods to gain these resources, such as drilling offshore in the Artic. BP’s annual report of 2009 states that the organization operates from deep beneath the ocean to complex refining environments. The risk of BP’s operations became evident when on 20th April 2010 with Deepwater Horizon. Figure 1 below shows the complicity of the current oil & gas business:

Figure 1: Oil complex Source: (Watts, 2005)

The super majors are all high-profile organizations that are often in the global news and it is a matter of public relations and image building to be seen

environmentally responsible (Blair and Hitchcock, 2001). Due to their worldwide presence and power and their vast exposure in the media, stakeholder pressure is enormous, especially from the ‘’green’’ stakeholder, such as Greenpeace and WWF. Furthermore, the super majors are operating in the mineral extractive industry with

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a direct relationship with natural environments, and are a large source of

environmental destruction. According to Ketola (2003,), “oil production and refining belong to the world’s greatest carbon dioxide emitters and little has yet been done within the oil industry to reduce the emissions of this greenhouse gas”. In an earlier study, Ketola (1997) states that the operations of oil super majors disturb and destroy vulnerable ecosystems such as rainforests, mangrove swamps and coral reefs, which leads to extinction of many of their flora and fauna. In a repost by the Ethical Consumer Research Association, the oil industry was appointed as one of the world's least ethical industries, presumably because of its reputation as the multi-national industry with the greatest singular impact on the environment.

Different stakeholders continually put pressure on the oil & gas industryto accept accountability for the environmental impact of their operations. There is one specific group of stakeholders that put a lot of pressure on the organizations disclosure policies, namely non-governmental organizations (NGO). Rinaldi (2014) states that NGOs are often proxies for other stakeholders who cannot directly take part in stakeholder dialogue process, such as nature, future generations of humans, or groups of the present generations with limited ability or capacity to engage in debate and dialogue. According to Benn and Bolton (2011), NGOs will often try to pressure corporations into appropriate action through the threat of financial harm caused by their campaigning activities. They also state that the campaigns of NGOs have influenced corporate strategies and behaviours to stop direct or indirect support of deleterious political, social and environmental outcomes. Deegan and Blomquist (2005) highlighted the importance of discussions surrounding

collaboration efforts by NGOs and how it legitimizes current practices with limited change occurring as a result. This paper provides evidence that organizations are prepared to listen to NGOs and indeed change or modify their behaviour.

Based on the above it can be concluded that the super majors modify their behaviour and disclose environmental figures to ensure that they are perceived as operating within the bounds and norms of their respective societies. They attempt to

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ensure that their activities are perceived by outside parties as being ‘legitimate’. Watts and Zimmerman (1978) stated that large firms are subject to more social and political pressure than small firms. Therefore, it is hypothesized that larger firms will increase their disclosures more than smaller firms. In addition, Deegan and

Unerman (2006) stated that managers of the multinationals have begun to use the notion of reputation risk management to maintain their 'licence to operate' in society. But what if the ‘licence to operate’ is endangered by a legitimacy-threatening

incident?

In many respects, ‘licence to operate’ is based on the concept of the social contract. As explained by Shocker and Sethi (1974), until relatively recently,

legitimacy was considered only in terms of economic performance. As long as a firm was successful (profitable), it was rewarded with legitimization. But during the 1960s and 1970s, society's perceptions of business changed. Tinker and Niemark (1987) note that: "the public, in general, became increasingly aware of the adverse consequences of corporate growth." Hurst (1970) suggests that one of the functions of accounting, and subsequently accounting reports, is to legitimize the existence of a corporation. Such views highlight the strategic nature of financial statements and other related disclosures. In a study, Deegan and Gordon (1996) reviewed annual report environmental disclosures made by a sample of companies from 1980 to 1991. They investigated the objectivity of corporate environmental disclosure practices and trends in environmental disclosures over time. They found that: increases in corporate environmental disclosures over time were positively associated with increases in the levels of environmental group membership; corporate

environmental disclosures were overwhelmingly self-laudatory; and there was a positive correlation between the environmental sensitivity of the industry to which the corporation belonged and the level of corporate environmental disclosure.

According to Beelitz and Merkl (2011), legitimacy threats arise from an organisation failing to act in a manner which society considers normatively appropriate, for instance by failing to meet society’s expectations with respect to

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product safety, animal welfare, or human rights. Two months after the oil spill disaster in the Gulf of Mexico, the shares of BP plunged by nearly 36% (The

Guardian, 2010). The shareholders had doubts about the existence of BP, and so the value of BP’s shares plummeted.

Another example of a legitimacy-threatening incident is the case of Brent Spar. In this case there was a conflict between Shell and Greenpeace about the plans of Shell to dump its redundant oil storage platform, Brent Spar, off the coast of Western Scotland. Greenpeace activists started to demonstrate at more than 300 Shell gas stations in Germany, and after two weeks German Shell gas stations were reporting up to 50% loss in sales. By this time, the consumer boycott was also escalating in other North Sea countries such as Denmark and the Netherlands, and not only individual consumers, but increasingly also companies and public authorities either cancelled their contracts with Shell or threatened to do so

(Watzold, 1996). Thus Brent Spar can be seen as a legitimacy-threatening incident, as Shell was in danger of losing its ‘social contract’.

Sethi (1977) states that legitimacy crises can be precipitated by sudden revelations of new information about a company that differs from prior perceptions. Or as in case of Shell’s Brent Spar, an environmental accident linked to an

organization can lead to a legitimacy crisis.

Crises inevitably endanger the reputation of an organization (Barton, 1993). According to Benoit (1995), image restoration discourse explains how an individual at fault or a corporation accused of a disaster can employ strategies to restore its image.Image restoration discourse focuses on message options and how

organizations are using them to respond in crisis situations. Five major image restoration strategies have been posited (Benoit, 1997, p. 179): 1. Denial – shifting the blame, 2. Evasion of responsibility; 3. Reducing offensiveness of event; 4. Corrective action; and 5. Mortification.

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Dowling and Pfeffer (1975), Lindbolm (1993) and O’Donovan (2002) observed three types of communication strategies used by legitimacy-seeking organizations: Image Enhancement; Avoidance/Deflection; and Disclaimer. By practicing an image enhancement strategy, organizations try to appear legitimate by linking themselves to positive social values, disclosing self-congratulatory information about their commitments and accomplishments in regards to social and environmental matters. With the avoidance/deflection strategy, organizations try to be legitimate by redirecting or deflecting attention from specific social and environmental concern issues to other non-related matters. The disclaimer strategy involves organizations issuing disclaimer statements, denying their responsibilities for negative or harmful events, matters or incidents.

Patten (1992) examined the effects of the Exxon Valdez oil spill on the annual report environmental disclosures of petroleum firms other than Exxon. The outcome of the study was that after the Valdez spill, Exxon's competitors increased their environmental and social disclosures. So in this study the evidence was that an increase in disclosure is used to manage legitimacy theory (disclaimer strategy). A case study by Cho (2009) examined the reaction of Total after two incidents: the sinking of the Erika tanker, leading to a major oil spill along the Atlantic coast of Bretagne, in 1999; and the deadly explosion of the AZF chemical plant in a suburb of Toulouse in 2001. This study provides evidence that Total managed its legitimacy differently for each incident. For the Erika disaster, Total used an image

enhancement strategy. In the annual reports of 2000 and 2001, the company specifically focussed on enhancing damaged image and reputation. For the AZF Toulouse explosion, Total once again used an image enhancement strategy, but the disclaimer and avoidance/deflection strategies were also used more in annual statements and press releases.

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1.2 Motivation, research question and contribution

The objective of this study is to provide empirical evidence regarding reactions to a legitimacy-threatening incident happening to a competitor. The motivation for this study is that there are numbers of studies that have examined the effects of annual environmental disclosure after legitimacy-threatening incident. For example, Botes and Samkin (2012) focused on steps taken by BP when facing the worst environmental disaster in history (Deepwater Horizon), to restore their legitimacy. Cho (2009) examined the reaction of Total SA after two legitimacy-threatening incidents. Muralidharan et al. (2011) examined BP’s strategies to

preserve and restore the corporate image after the oil spill in the Gulf of Mexico, and the company's search for means to mitigate the intensity of the ongoing threat to individuals and a delicate ecosystem. However, until now, studies have mainly looked at the reactions of the companies hit by a legitimacy-threatening incident. This study looks specifically at the reactions of the super majors after BP’s oil spill disaster in 2010.

My interest in the Oil & Gas industry stems from two factors. First of all, the super majors are operating within an environmentally and politically sensitive industry and so are constantly facing ethical and social issues around the globe. Moreover, the price of a barrel of oil is rarely based on the market mechanism. Instead, the biggest driver of oil prices is political influence. Nowadays, oil is power in the sense of being a primary factor in the process of asserting and maintaining political dominance and control. Oil is needed to grow food, infrastructure, manufacture goods and transport them to the consumers. It lubricates the

mechanisms of both national and international politics. Individuals, companies and sovereign states use oil and gas resources to gain and maintain influence in the world. And this makes the price of oil so unpredictable.

In this study I would like to look how the competitors react to legitimacy-threatening incidents. In some cases the competitor can gain from the slip of a

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competitor, for instance, if shareholders decide to sell shares of a ‘harmed’ company to buy shares of the competitor instead. What if stakeholders lose their confidence in the whole industry? In the case of the Gulf of Mexico oil spill, questions were raised about extraction methods used by the entire oil industry. I think it is interesting to examine what steps competitors take to maintain their ‘licence to operate’ by an incident caused by a company from the same industry (disclosures, communication strategies, etc.).

The research question of this thesis is framed as follows:

What are the reactions of oil & gas super majors to a legitimacy-threatening incident happening to a competitor?

I hope this study will contribute to the existing literature as I approach from another point of view, namely the competitors' view. The findings can be used by stakeholders of the oil & gas industry, and can be used for better decision-making and understanding of CSR reports. Most studies until now have been of quantitative nature and only a handful of researchers have utilized qualitative research

methodologies to understand the research question in this field (for example, O’Donovan, 1999; Campbell, 2000). Furthermore, I think the findings of this study can be also transferred to other fields, such as the nuclear and chemical industries. This results and insights of this paper might be interesting for the consumers and managers of super majors, auditors, (potential) investors and individuals with a specific interest in BP’s Deepwater Horizon oil spill.

1.3 Thesis structure

The remainder of this paper proceeds as follows. The next chapter contains a description of Corporate Social Responsibility (CSR) and will also provide a review of key academic literature. Subsequently, the third chapter discusses theoretical perspectives on legitimacy theory. This chapter will outline the importance of

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legitimacy for an organization. The main objective of chapter four is to present an explanation of the research methodology, procedure and methods, demonstrating how these were designed to answer the research questions. Chapter five discusses the empirical results of this study. Finally, the chapter six and seven will provide respectively the discussion and conclusion of this study.

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2. Literature review on corporate social responsibility

2.1 Introduction

This chapter will describe the underlying theories and different point of views on social and environmental responsibility (hereafter, CSR) and CSR disclosures. Over the last decades many theories have been defined regarding CSR, all of them emphasizing the importance of voluntary disclosure of CSR figures.

2.2 Definition Corporate Social Responsibility (CSR)

Since the first CSR report in 1950s, CSR has developed from an

uncoordinated, voluntary practice into a detailed, running commitment (Klonoski, 1991). For a well-known organization it has become important that their annual reports and financial statements include social and environmental data (Amaeshi et al., 2008). Deegan and Rankin (1996) argue that investor decisions are not only based on economic factors, but also take social and environmental factors into consideration. Basically, if potential investors see a project that could damage the environment or human health, they will most probably reject the project as they do not want any reputation damage.

Even after many years of research and debate there are still are not clear definitions of CSR. One group of authors define CSR as simply the commitment to abide by the social-related laws and regulations enacted by government (Friedman, 1970; Davis, 1973). This means that a company must pay their taxes to the

government, and the same government has a duty of securing the social welfare of all members of society on behalf of these companies. Thereafter, the companies should not be charged with the expenses of others' social welfare (Friedman, 1970). Deegan and Rankin (1996) confirmed this view in an Australian study among managers. Some of those managers believe that companies should only take ‘’extra’’ social environmental responsibilities if it contributes to more profit or enhances their image. In addition, Crane and Matten (2007) argue that organizations in the free market are firstly accountable to shareholders who demand the highest possible

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returns on their investments, then to employees who need an proper wage to pay their bills, and finally towards consumers who demand products of the highest possible quality.

The second group of authors consider CSR as a commitment to improve social welfare. According to Spicer (1978), CSR is a company’s positive attitude to improve social welfare of various groups. This view is also confirmed by the report of

Business Council for Sustainable Development (2011), who define CSR as the obligation and commitment of companies to achieve sustainable economic growth and social development through the improvement of the living conditions of staff members, their families and the surrounding community.

There are two main trends in terms of CSR. The first group sees CSR as a tool to facilitate profit for a company, while the other group considers CSR as an

obligation of an organization towards society. However, there is a third group that argues that CSR should be a balance between the company’s commercial interests and organizational obligations to society. For example, McWilliams and Siegel (2001, p.117) define CSR as “actions that appear to further some social good, beyond the interests of the firm and that which is required by law”. Gray et al. (1996) see CSR as a stakeholder-oriented concept that should go beyond a company’s boundaries and should be driven by an ethical understanding of organizational responsibility for the impact of its operations. Turker (2009) agrees with Gray et al. (1996) that organizational behaviour should affect stakeholders positively and go beyond economic interest. This stream of authors basically combining the first two concepts, arguing that a company must aspire to make a profit but at the same time not forget its responsibilities towards society and the environment. To conclude, all the above definitions makes clear that companies have legal and economic social responsibilities towards society and the environment.

2.2.1 Components of Corporate Social Responsibility

As already mentioned, the current literature is not completely clear about the definition of social responsibility and there is a lack of agreement on the various

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components of this responsibility. One group of the authors argues that if an organization is willing to show CSR, they only have to fulfil legal and economic obligations. The second group of authors argues that the multinationals have additional responsibilities towards society besides their economic and legal obligations. Carrol (1991) suggests that companies must operate in an ethical way and should contribute to the welfare of society. This is also confirmed by Wartrick and Cohan (1985), who say that beside the legal and economic function, CSR must fulfil interests in ethical, professional, environmental and health issues, should care about the training and rehabilitation of employees, and must contribute to the local community. Companies benefit from taking an interest in CSR as it will increase the job satisfaction, dedication and productivity among the employees, and will also enhance the credibility of an organization. This should all reflect in higher profits (Hoopwood, 2009).

According to this group, social responsibility can be divided into four components: economic, legal, ethical and philanthropic responsibility (Caroll, 1991; Crane and Matten, 2007). This group accepts that the company’s first objective is to make profit, as long as the company adheres to the ethical considerations and interact with the community. It is hard to draw lines between these responsibilities. Figure 2 gives an indication of how these responsibilities fits together.

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20 Figure 2: The pyramid of Corporate Social Responsibility

Source (Caroll, 1991, p.42)

2.2.2 Economic Responsibility

The economic aspect is central to any discussion regarding CSR. The economic responsibility is one of the major corporate responsibilities (Friendman, 1970), as most of the companies undertaking activities are economic in nature. This is also confirmed by Carrol (1979), who argues that above all else, the companies are the basic unit in the society, as they are responsible for producing goods and

services. However, beside the duty to maximize shareholders profit, an organization must provide ‘’adequate’’ salaries for employees and make good-quality products for the consumer market (Crane and Matten, 2007). Figure 3 summarizes the key economic responsibilities of a company:

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21 Figure 3: Economic responsibility of an organization

Source: (Carroll, 1991, p.41)

2.2.3 Legal Responsibility

Crane and Matten (2007) state that the legal responsibility reflects

organizational commitment and adherence to the regulations enacted by society and pre-agreed limits. These laws basically set standards and norms that an organization must comply with. The companies consider voluntary social activities as a waste of money, and would rather spend these resources somewhere else in the organization (Deegan and Rankin, 1996). In fact there is no incentive for companies to engage in social desirable behaviour. They only participate actively in cases of legal

prosecution when not complying with laws and regulations (Deegan and Rankin, 1996). The study of Trevor and Geoffrey (2000) of the largest listed Australian firms showed that those firms saw regulations as the biggest driver to meet their social obligations. To conclude, governmental laws and regulations are crucial in binding an organization to its social responsibilities. Figure 4 summarizes the key

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22 Figure 4: Legal responsibility of an organization,

2.2.4 Ethical or Moral Responsibility

The main definition of moral responsibility provided by Crane and Matten (2007) is that it is a number of principles and values which guide people’s behaviour towards what can be seen as good/right, and avoiding bad/evil behaviour. Another definition of ethical responsibility is given by Caroll (1991. p56): ‘’Ethical

responsibilities embody those standards, norms, or expectations that reflect a

concern for what consumers, employees, shareholders, and the community regard as fair, just, or in keeping with the respect or protection of stakeholders moral rights’’. Although legal responsibilities can be met by simply complying with the law and regulation, ethical responsibility is more broad and comprehensive (Schwartz and Carroll, 2003). Ethical responsibility involves continuing commitment to

transparency, consumer protection, fair competition and avoidance of fraud and monopoly. Figure 5 below summarizes the key components of ethical or moral responsibility.

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23 Figure 5: Ethical/moral responsibility of an organization,

2.2.5 Philanthropic Responsibility

Philanthropic responsibility is more an optional responsibility. Here, society expects the companies not only fulfil their social responsibility required by law, but to go further and show their commitment to society (Carol, 1991). Crane and Matten (2007) argue that companies taking on philanthropic responsibilities are not doing so in expectation of short-term profit. Deegan (2002) states companies should provide this philanthropic or optional responsibility for free, even it negatively impacts on their profit. By taking these responsibilities, companies will be rewarded with greater long-term profit and enhanced image (Adams, 2008). Figure 6 summarizes the key components of philanthropic responsibility:

Figure 6: Philanthropic of an organization Source: (Carroll, 1991, p.41)

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2.3 Definition of Corporate social and environmental disclosures (CSR)

Before the 1960s, environmental issues did not attract a lot of attention in society (Dunlap, 1997). However, during the 1960s the society became increasingly

interested in environmental issues (Dunlap, 1997). The interest was partly driven by concern about pollution on individuals in society. In response to these concerns, organizations and companies (especially multinationals) started to publish CSR figures (Unerman et al., 2007). These reports have become a tool for multinational companies to legimatize their actions in society, and gain their licence to operate. Therefore, nowadays most organizations and companies disclosure, besides annual reports with financial figures, CSR reports (Morsing, 2006).

As noted by Milne and Gray (2007), sustainability reporting has evolved over the relatively recent past from nothing more than disclosures on environmental and social policies and impacts included in annual financial reports to stand-alone combined reports including social, environmental, and economic/financial

information. For instance, in the Exxon annual report of 1989 (the year of the Exxon Valdez oil spill disaster), 3.5 of the 6 pages of the report were devoted to the Exxon Valdez accident (Patten, 1992). Twenty years later, in BP’s stand-alone Sustainability Review of 2010 (the year of the oil spill in Gulf of Mexico), 37 of the 44 pages were focussed on this disaster (BP, Sustainability Review 2010). Gibs and Clarke (1999) state that though some elements of CSR reports are required by law, many of them are reported on a voluntary basis. The choice to issue a stand-alone sustainability report is voluntary, and although there are some organizations such as the Global Reporting Initiative (GRI) and Sustainability/UNEP offering guidance and recommendations for disclosure, there are no specific requirements or regulations (Unerman et al., 2007). Figure 7 shows the rise of corporate responsibility reporting in the last two decades:

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25 Year 1993 1996 1999 2002 2005 2008 2011 N100: Percent of Companies with CR report 12% 18% 24% 28% 41% 53% 64% G250: Percent of

companies with CR report - - 35% 45% 64% 83% 95%

Table 6 The rise of corporate responsibility reporting Source: (KPMG, 2005; KPMG, 2008; KPMG, 2011)

Berthelt et al. (2003) define CSR disclosures as follows: “the impact company activities have on the physical or natural environment in which it operates”. According to Gray et al. (1987), CSR is the incorporation in the company’s reports describing a set of clauses and information items about the past, current and future CSR activities and performance. The World Business Council for Sustainable Development defines CSR as: “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of its workers, as well as the local community and society at large.”

CSR disclosure has several roles for an organization (Jenkins, 2006). Firstly, it assesses the social and environmental impacts of organizational activities and measures the effectiveness of CSR programmes. Furthermore, it makes reports on corporate social and environmental responsibilities. Finally, it allows external and internal information systems to make comprehensive assessments of all

organizational resources and sustainability impacts. CSR reports are mostly voluntary disclosures. So what are the drivers for the companies to do them? To answer this question we need to assess the importance and the benefits they can bring to companies.

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2.3.1 Importance of CSR disclosure

CSR disclosure can be mandatory or voluntary. Caroll (1991) states that mandatory disclosures are undertaken to fulfil the law and regulations (legal responsibility). Organizations are committed to disclose financial and non-financial information to the users of annual reports (Berthelt et al., 2003). Although there are many regulations that commit companies to disclose their CSR activities, in practice there is no total obligation to disclose these figures (Cho et al., 2008; Islam et al., 2005).

Islam et al. (2005) state that optional or voluntary disclosures are undertaken without pressure from external parties, and they are intended to provide extra information to company stakeholders (investors, NGOs, employees). This raise a question as to why companies undertake voluntary disclosures, when they know that they are not obliged to do so? By publishing this figures publically,

organizations expose themselves to possible damage reputation and extra costs. Mathews (1995) identifies three arguments why companies undertake voluntary reporting. The first argument is related to market performance, as companies believe that CSR disclosures will enhance their market performance. The second argument concerns management organizational legitimacy. The last argument is based on the notion of the social contract between the practice and society (The Stakeholder Theory). Besides that, companies use social and environmental disclosure as a tool to reduce their exposure to social and political pressures (the legitimacy argument). Organizations also (increasing) use the disclosures as a crisis management tool to save legitimacy (Cho et al., 2012).

In addition to this, there is another role played by companies using CSR reports. Rather than comply with legislation, organizations and companies can use reports to improve their reputation. By improving and maintaining corporate reputation, organizations can create sustainable growth (Rattanaphphtam & Kunsrison, 2011). The conclusion here is that the quality of the environmental disclosure can be seen as a key value for the organization. A high-quality CSR

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disclosure suggests a superior level from an organization in terms of transparency and accountability (Babatunde, 2005). In the case of the oil & gas industry, it will help to reinforce the relevance of the legitimacy theories to the whole industry. Finally, as a result of increased interest in CSR disclosure, it is starting to play a greater role in decision-making, especially for investors. A number of studies have shown that investors consider social and environmental factors alongside economic factors when they make their investment decision (Stevens, 1991; Deegan and Rankin, 1996).

2.3.2 Sustainability reporting and standards (GRI)

The Global Reporting Initiative (GRI) has developed the first comprehensive Sustainability Reporting Framework that is widely used around the world.

According to GRI, a sustainability report represents the organization's values and governance model, and demonstrates the link between its strategy and its

commitment to a sustainable global economy. An organization publishes in these reports the economic, environmental and social impacts caused by its everyday activities. Following on motivation of CSR disclosures, companies are eager to publish good qualitative reports, and to measure this, the GRI is the standard (GRI, 2013).

The GRI was founded in 1997 with the idea of creating a disclosure framework. The first framework was released in 2000 (G1), and the latest version (G4) in May 2014. The framework is constantly changing and does not simply continue using one framework without taking the changing environment into account. The GRI

framework aims to answer two main questions: what should be reported (contents and scope), how should this be reported (quality). The framework complies with the conceptual framework of IFRS. Furthermore, the GRI gives guideline to an

organization for general standard disclosures.The General Standard Disclosures are divided into seven sections (GRI, 2013):

1. Strategy and Analysis.This section provide a general strategic view of the organization’s sustainability

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2. Organizational Profile. Provides organizational characteristics.

3. Identified Material Aspects and Boundaries. Defines organizational process following Report Content, the identified material Aspects and their

Boundaries, and restatements.

4. Stakeholder Engagement. Gives an overview of stakeholder engagement during the report period.

5. Report Profile. Provides basic information about the report.

6. Governance. The framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company's relationship with its all stakeholders.

7. Ethics and Integrity. The standards of the organization’s values, principles,

standards and norms.

Next to the standard GRI framework there is the GRI supplement, which focuses specifically on industry sectors. There has also been a framework supplement developed for the oil & gas industry. Alongside the standard GRI framework, companies should include sector-specific disclosures and performance indicators in the sustainability reports. Issues that are taken into the account are: water, bio fuels, emissions, health impact assessment, safety processes and renewable energy.

Besides the GRI framework, there are some other standards for CSR reports, such as AccountAbility framework and ISAE 3000. Rasche (2011) argues that these reports should reflect positive and negative aspects of an organization’s performance and the information must be accurate, reliable, timely and detailed. Finally, it must be presented in an understandable manner.

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3 Theory development

3.1 Introduction

In this chapter, legitimacy theory will be used to explain corporate environmental disclosures.

3.2 Legitimacy theory

Legitimacy theory has become one of the most cited theories within the social and environmental accounting area. There are many definitions for legitimacy. Here the most prominent will be highlighted. Maurer (1971, p. 242) gave legitimacy a hierarchical, explicitly evaluative cast, asserting that: "legitimation is the process whereby an organization justifies to a peer or superordinate system its right to exist." Another prominent researcher Pfeffer (1978) highlighted cultural conformity rather than overt self-justification. In this view, legitimacy has no congruence with the social values associated with or implied by practical activities and the norms of acceptable behaviour in the larger social system. According to Cho (2010), legitimacy theory suggests that social disclosure is a direct function of social and/or political pressure faced by organizations. In other words, firms under higher pressure will provide a larger amount of social disclosures. Proponents of the theory, such as Lindbolm (1993) and Patten (1992), argue that the demand for legitimacy systematically drives the extent of social and environmental disclosures.

3.2.1 Types of Legitimacy theory

Suchman (1995) distinguished three separate dimension of legitimacy:

pragmatic, moral and cognitive. According to the author, pragmatic legitimacy involves support for a practice based on its perceived practical consequences or instrumental value for its most immediate audiences. This legitimacy dimension has three sub-types: Exchange; influence; and dispositional. In exchange legitimacy, the support for organizational values is based on the practices' specific values to a set of constituents. Related but slightly socially constructed is the influence legitimacy,

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where the support is not necessarily based on favourable exchanges, but rather on being responsive to their larger interests. The last sub-type of pragmatic legitimacy is dispositional legitimacy, where support for the practice is based on convincing constituents that they have their best interests at heart and is inherently trustworthy (O’Dwyer, 2011).

Moral legitimacy reflects a positive normative evaluation of an organization and its activities. It reveals constituent beliefs about whether a practice effectively promotes societal welfare as determined by the audience’s socially constructed value system (O’Dwyer, 2011). This type of legitimacy can be divided into four sub-types: Consequential, procedural, personal and structural. Consequential legitimacy involves primarily judging an organization by what it accomplishes. Procedural legitimacy involves embracing socially accepted techniques and procedure. According to Scott (1992), procedural legitimacy becomes significant when the measures of outcome are unclear. Personal legitimacy derives from individual characteristics of organizational leaders, for example charisma. The fourth and last type of moral legitimacy is the structural legitimacy, which comes from the socially constructed legitimacy to perform tasks.

Cognitive legitimacy is when organizations pursue objectives and activities that constituents take for granted as being appropriate, proper and desirable (O’Dwyer 2011). Cognitive legitimacy has two types: comprehensibility and taken-for-grantednees. Comprehensibility legitimacy stems from the availability of cultural models that try to explain the organization. According to ‘’taken-for grantedness’’ legitimacy, practices depict a more sedate scene of cognitive coherence and glacial, integrative change. Figure below summarizes Suchman’s strategy dimensions:

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31 Figure 7: Summary of Suchman’s typology of legitimation

Source: Suchman’s (1995)

3.2.2 Strategies of Legitimacy theory

Suchman (1995) identifies three types of strategies aimed at securing the legitimacy dimensions above. O’Dwyer (2011) in his paper ‘’Seeking legitimacy for new assurance forms’’ produced a good explanation of how these strategies work. The first strategy is the confirm strategy, which is developed to secure pragmatic strategy. This strategy illustrates how practices conform to the instrumental needs and demands of key existing constituents or offers some access to decision making about the nature and operation of the practice, or both. The second strategy is the selection strategy, which involves efforts to select among multiple environments in pursuit of an audience that will support the proposed practices. To establish pragmatic legitimacy, organizations need to select constituents who value the types of exchanges the practice can provide. Moral legitimacy is based upon selecting and promoting moral criteria suited to selected constituents. The last strategy is the manipulation strategy. With this strategy companies create new legitimating beliefs and new audiences. The figure below provides a summary of legitimacy strategies:

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32 Figure 8: Summary of Suchman’s (1995) legitimation strategies

Source: Suchman’s (1995)

3.2.3 Organisational Legitimacy

Organizational legitimacy has been researched numerous times by many researchers (Ashforth and Gibbs, 1990). Despite this, the definition of organizational legitimacy is still not clear (Suchman, 1995). According to Babatunde (2005), there

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are two approaches for the legitimacy. The first focuses on the organisational level, e.g. BP’s oil spill in the Gulf of Mexico, and the other one has more a Marxian approach, focusing on the legitimacy of the system in its entirety, e.g. justifying the existence of a socially unacceptable company, for example one using child labour in development countries,on the basis that it creates employment. According to Dowling and Pfeffer (1975), legitimacy theory is founded on the concept of

organisational legitimacy, which exists when there is ‘congruence between an entity’s value system and that of the society in which it operates’. Further, it promotes corporate viability by ensuring the necessary availability of capital, labour, and customers (Pfeffer & Salancik, 1978). The major premises of organizational legitimation are illustrated in Figure 10following Dowling and Pfeffer (1975) and Pfeffer and Salancik (1978). Organizational survival depends upon its legitimacy, which is defined as the "congruence" between organizational performance and institutional norms.

3.2.4 Legitimacy gap

Nevertheless, it is hard to measure legitimacy empirically. For a better understanding of legitimacy theory and any attempt to measure it, the concept of legitimacy gap needs to be discussed. Legitimacy gap is the discrepancy between business behaviour and societal expectation (Sethi, 1977). Lindblom (1994) states that a legitimacy gap is the difference between the expectations of the relevant publics relating to how an organisation should act, and how organization actually does act. When the gap is wide, the organization’s survival is threatened. Heath (1997)

defining the legitimacy gap as an issue between the organization and society because of the ‘’misunderstanding’’ of facts, values, or policies. The gap occurs when the issue becomes controversial in society, e.g. BP’s spill in Gulf of Mexico, or Shell’s Exxon Valdez. According to the same author, the legitimacy gap acknowledges the discrepancy between social norms and organizational behaviour (Heath, 1997). According to Wartick and Mahon (1994), the reactions in perceived gaps in

legitimacy will depend on management’s perception of the level of acceptability that society accords its activities. A low threat represents a high level of acceptability and

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vice versa. Thus, different situations will constitute a legitimacy gap to different managers. This concurs with Suchman’s (1995) statement that an organisation’s choice of public disclosure tactics and legitimation depends on whether it is seeking to gain, maintain, or repair legitimacy.

3.2.5 Create, maintain of repair legitimacy

A number of scholars have suggested that discourse and rhetoric play a key role in creating, maintaining, and repairing legitimacy (Elsbach, 1994; Phillips and Malhotra, 2008). They also highlighted three purposes for legitimation efforts: Gaining, maintaining, or defending/repairing legitimacy. Creating legitimacy can involve organizational attempts to overcome its ‘liability of newness’ (Ashforth and Gibbs, 1990), for example when a super major find a new oil field in Alaska. At the beginning, society perceives this as strange, weird, or unfamiliar. For innovations to attain social acceptance, niche actors must engage in legitimation activities to convince actors in their social setting of the compatibility of the new technology to existing norms, values, beliefs and definitions (Onsongo and Walgenbach, 2015). If an organization is willing to maintain legitimacy it must first identify the key stakeholder who will be affected by the situation. Secondly, the organization must apply some tactics to maintain their legitimacy with this stakeholder group (O’Donovan, 2000), such as voluntary CSR reporting. The repairing legitimacy involves reacting to a crisis (damage control) or pre-acting (damage mitigation). The oil industry’s usual reaction to oil spills constitutes an attempt to repair its tarnished legitimacy.

3.2.6 Limitations of legitimacy theory

Organizations' disclosure of CSR information is often reactive and not pro-active. For example, a company releases information as a reaction to negative publicity in the media about its activities, rather than releasing it as an obligation to inform its stakeholders. By doing this, organizations fall short of true transparency and accountability (Babatunde, 2005). Therefore an organization with a strong communication strategy can maintain positive public opinion, even if it has a

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negative impact on society. Another limitation according to Deegan (2002) is the difficulty in predicting how managers will respond to legitimacy threat and the form and extent of it. Finally, what if companies only disclose or adjust their behaviour for symbolic reasons? Impression management refers to the process by which people manage their impression and adjust their behaviour in order to make a good impression on others. Despite egoistic human nature, people behave in a manner required by others or by society in order to manage their impression, enabling people to maintain relationships with others and to cooperate with others for the public interest (Leary and Kowalski, 1990). Unerman et al. (2007) acknowledge that many critics of the sustainability accounting trend see the reports as little more than public relations tools designed to gain or maintain the approval of those

stakeholders whose continued support is crucial for the survival and profitability of the business.

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4. Methodology

4.1 Introduction

The previous chapters outlined the definitions of CSR and legitimacy theory. In this chapter, the research method of this thesis will be presented. The aim of this chapter is to make a link between super majors CSR disclosures, and the legitimacy theory.

4.1 Research methodology

The research world knows two main research methodologies. The first one is the quantitative method, which generally uses scientific methods and models. This method is used to form hypotheses or tested to find generalizations. This type of method is considered as hard and reliable, as the researcher is not allowed to give their own interpretation of the outcome of the study. However, not everyone agrees that quantitative methods provide hard evidence. According to the criticisms on quantitative research, researchers have very little ability to find out more detail and some variables might be missing.

The second research mythology is qualitative research. This method is used to test theory or used to define/explain phenomenon. It is a softer, more speculative and more subjective method than the quantitative method. There is also some criticism of this method as it allows the personal interpretation of the researcher’s study. In this the data is understood simply as the analysis of words rather than numbers (Bryman 2004, 2008).

Quantitative research is more applicable to test hypotheses with hard and reliable numbers, while qualitative research is more applicable for discovering phenomenon. To answer the research question of this study the qualitative method is more applicable as this research focusses on discovering what the reaction of a competitor would be to an incident affecting a competitor. The methods of

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qualitative research include: interviews, observation documentary analysis,

discourse analysis, ethnography, and action research (Silverman, 2000). The research question will be assessed through the content analysis of CSR disclosures made by super majors. The authors who were using this method rely on counting words to detect patterns in the data and subsequently analyse those patterns to understand what they mean and make connections(Sandelowski, 2000).

4.2 Content analysis

Content analysis is a research technique for making replicable and valid inferences from data according to the context (Krippendorff, 1980). According to Downe-Wamboldt (1992), the goal of content analysis is ’’provide knowledge and understanding of the phenomenon under study”. This research methodology is common used in SAE research (Patten, 2002; Cho, 2009). Content analysis has been widely applied to investigate CSR reporting. The numbers of studies that use content analyses has been growing steadily. In 1991 there were only 97 studies conducted by means of content analyses, by 1997 it was 332 and in 2002 had grown to 601 (Hsieh and Shannon, 2005).

The advantage of applying a content analysis method is that it can be used for both quantitative and qualitative research. It is also an unobtrusive means of

analysing interactions, providing valuable insights over time. Establishing reliability is easy and straightforward. Further, of all the research methods, content analysis scores highest with regard to ease of replication (Beelitz et al., 2010). Nevertheless, there is also some criticism of this method. According to Downe-Wamboldt (1992), a major limitation of content analysis is that the voluntarily reported CSR disclosures made by a company do not always reflect the company's actual behaviour.

4.3 Research Method

This study examines super majors' CSR disclosures in response to 2010's BP oil spill in the Gulf of Mexico. The paper focuses on two issues: the change in the CSR disclosures, and the legitimacy strategy used (confirm, selection and

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manipulation). The CSR disclosures in the annual reports of the super majors were compared in 2009 (before the crisis) with the disclosures in 2010 (after the crisis). The change in the disclosures has been assessed by the way of sentence count; this method is very common in environmental reporting research (Deegan et al., 2000; Hackston & Milne, 1996). According to Abbott & Monsen (1979), sentence counting allows qualitative data to be divided into different categories to make it possible to analyse the increase/decrease in types of CSR disclosure. The initial interest was to see change in the volume of disclosures between years 2009 and 2010, which made sentence counting appropriate for this study. Hooks and Van Staden (2011) also support the sentence count method as it demonstrates volume counts, and quality scores of environmental disclosures yield highly correlated results. However, by conducting only a content analysis by means of sentence count, there is one

important limitation to the study, in that it has focused more on the quantity instead of quality of the words counted (Unerman, 2006).

Based on the prior research, environmental disclosures will be classified as positive, negative or uncertain/neutral (Deegan and Rankin, 1996). Positive or negative information is the degree of harmony between a company’s operations and the environment. For the neutral category it is unclear what the impact on the environment is.

The legitimacy strategies were also examined used by super majors, which helps to understand the patterns, motivation in behaviour of super majors. These legitimacy strategies (confirm, selection and manipulation) are based on Suchman's (1995) framework and aimed at maintaining, repairing or regaining legitimacy.

4.5 Population and Sample

This study evaluates the changes in the CSR disclosures of the super majors BP, Total, Shell, ExxonMobil, Chevron, and ConocoPhillips. According to Fortune (2010), these are the largest oil & gas companies in terms of market capitalization. In addition, these companies are used to benchmark each other, so according to

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legitimacy derived expectations, it is likely that incidents affecting the legitimacy of one company will affect the legitimacy of the others.

The CSR disclosures in the annual reports have been compared of the year 2009 (BP 2009, Chevron 2009, ConocoPhillips 2009, ExxonMobile 2009, Shell 2009, Total 2009) with the 2010s disclosures (BP 2010, Chevron 2010, ConocoPhillips 2010, ExxonMobile 2010, Shell 2010,Total 2010)

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5. Results

5.1 Introduction

The first four chapters presented the theoretical framework and background to the study, and the remainder of the thesis will present the empirical results of this content analysis study. This chapter will analyse and discuss the change in super majors' CSR reports disclosures between 2009 and 2010 by means of sentence count. Firstly, this chapter will analyses the CSR reports of BP and subsequently the reports of super majors (excluding BP) will be analysed and discussed, based on Suchman's (1995) legitimacy strategies.

5.2.1 BP's disclosure

For better understanding of the behaviour of the super majors, BP's

sustainability reports were also compared and analysed. The table below provides the overview of the change between 2009 and 2010 in total counted sentences of environmental disclosures made in BP's stand-alone sustainability reports:

Year 2009 Year 2010 +/- % Change

Positive 249 351 + 41%

Neutral 298 312 + 5%

Negative 113 147 + 30%

Average + 25%

Table2: Comparison of BP’s environmental disclosures between the year 2009 and 2010

In BP's 2010 sustainability report, 37 of the 44 pages were focused on or related to the Gulf of Mexico disaster. As it was expected, BP increased their CSR disclosures in 2010 more than their competitors, because they needed to regain legitimacy. Positive CSR disclosures increased by 41%. For example Bob Dudley (CEO) stated the following:

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41 ‘’ To ensure that our enhancements to safety and risk management are applied quickly, thoroughly and effectively, we are carrying out a wide-ranging change programme. We have set up a new safety and operational risk function that has its specialist personnel embedded in BP’’ (BP 2010, p. 2)

BP's negative CSR disclosures also increased significantly (by 30%):

‘’ BP recognizes that the Deepwater Horizon accident has had a significant impact on many aspects of life along the Gulf Coast, ranging from environmental and wildlife to economic and social issues’’ (BP 2010, p. 6)

There is no big change in neutral CSR disclosures. The main signal to the outside world of BP's 2010 sustainability report is that the organization recognizes in full the disaster, has learnt from its mistakes and will do everything to recover the damage to all stakeholders.

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5.2.2 Super majors

'

disclosures

The table below provides an overview of the change between 2009 and 2010 in the total counted sentences of environmental disclosures made in the annual reports or standalone suitability reports of the super majors (excluding BP).

Positive

Company Year 2009 Year 2010 +/- % Change

Chevron 31 45 + 45% ConocoPhillips 38 61 + 61% ExxonMobil 43 64 + 49% Shell 79 123 + 56% Total 128 195 + 52% Average + 53%

Neutral

Chevron 92 151 + 64% ConocoPhillips 12 11 - 8% ExxonMobil 33 31 - 6% Shell 81 108 + 33% Total 165 209 + 27% Average + 28%

Negative

Chevron 61 65 + 7% ConocoPhillips 0 0 +/- 0% ExxonMobil 3 4 - 6% Shell 38 65 + 71% Total 97 99 + 2% Average + 17%

Table 3: Comparison of super majors CSR disclosures between the year 2009 and 2010

As expected, there is an overall increase in the CSR disclosures for all super majors, especially positive disclosures. All the super majors showed a significant

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increase (with average of 53%) for positive disclosures. There is also an overall increase in neutral and negative CSR disclosures, 28% and 17% respectively. These results provide evidence that BP's oil spill in the Gulf of Mexico had an impact on the CSR disclosure behaviour of all super majors.

5.3 Legitimacy strategies

The results above show that all the super majors increased their disclosure. To get better insights in the disclosure patterns and motivations of super majors the legitimacy strategies will be examined to understand what they are doing to repair/maintain their legitimacy.

5.3.1Conform strategy

All super major oil companies mostly used the confirm strategy, as they want to be conform to the social expectations and demands of their public and thereby regain/maintain their legitimacy. In the disclosures they all assert their commitment to help restore any damage and prevent future disasters. Some disclosure examples are shown below:

‘’ Ensuring this valuable resource is available to consumers means that the oil and gas industry must work more diligently to prevent tragic incidents such as the 2010 Deepwater Horizon spill in the Gulf of Mexico.

ExxonMobil remains committed to a systematic and unwavering focus on corporate responsibility at all levels’’’ (ExxonMobill 2010, p.27)

‘’

Following BP’s accident in the Gulf of Mexico in 2010, TOTAL geared up to learn lessons from the disaster, analyze the potential risks for its operations in the light of these events and make recommendations to improve safety in deep-offshore environments, leading to the creation of three task forces’’ (Total, p.11)

‘’The Macondo incident in the U.S. Gulf of Mexico underscored that safe operations are fundamental to our ability to operate. Following Macondo, we led the industry in working with regulators to enhance operating standards in the Gulf ‘’ (Chevron 2010, p.2).

‘’ We were saddened by the tragic oil spill in the Deepwater Gulf of Mexico this past summer, and assisted in response efforts’’ (ConocoPhillips 2010, p.4)

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The majority of the super majors mentioned BP's Gulf of Mexico disaster in the letter from the Chairman and CEO in their annual reports, to attempt to transmit this important information to their relevant publics. They tried to convince their public that they are already operating in such way that a similar disaster would be unlikely to occur in their company. Some examples of this are shown below:

‘’ The Deepwater Horizon incident in the Gulf of Mexico last summer shook our industry and the confidence of many of our stakeholders.’ (ExxonMobill, 2010, p.23)

‘’We also met our key operational targets, while recording our safest year since the inception of ConocoPhillips in 2002 and increasing annual earnings to $11.4 billion’’ (ConocoPhillips 2010, p.2)

‘’ It will take time for our industry to recover credibility. But I believe Shell’s technical expertise, safety culture and rigorous global standards demonstrate that we are capable of operating responsibly, however challenging the conditions’’ (Shell 2010, p.1)

‘’ We leave nothing to chance because we have a deep, personal stake in operating safely — to sustain the public’s trust in our operations, to bring our employees safely home and to deliver value to those who invest in us’’ (Chevron 2010, p.3)

5.3.2 Selection strategy

The selection strategies often involve adhering to social and institutional pressures. To satisfy their relevant publics super majors emphasize their slow switch from fossil fuels to more green energy. As fossils fuels are scarce and super major must apply unconventional methods to bring this oil up, like deep water drilling which lead to the oil spill in Gulf of Mexico. The super majors showed in their disclosure their choice of more clean and sustainable energy to regain and maintain legitimacy. Here are some disclosure examples:

‘’Pursuing research and development to develop “clean” sources of energy, contributing to the moderation of the demand for energy, and participating in the effort against climate change’’ (Total 2010, p.8)

‘’ We continued to raise our production of natural gas – by far the cleanest-burning fossil fuel – that will account for over half our energy output in 2012 ’’ (Shell 2010, p.1)

‘’ We are the world’s largest producer of geothermal energy, and we continue to explore for more geothermal resources in Indonesia and the Philippines ’’ (Chevron 2010, p.35)

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5.3.3 Manipulation strategy

There was no evidence found that the super major were using the manipulation strategy in their CSR disclosures after the oil spill. This strategy involves an organization actively trying to change the environment. The relevant public was informed that BP was responsible for this oil spill due to huge amount of publicity. In this case, an attempt to change the environment would have harmed one of the oil companies instead of repairing/maintaining legitimacy.

In summary, the super majors mainly used conform strategy to maintain their legitimacy. They used positive disclosures to show the outside world that their current operations are safe, that these kinds of incidents would be unlikely to occur in their companies, and to demonstrate their commitment to help restore the damage caused by the oil spill. The selection strategy was mainly used to show the choice of super majors for cleaner energy and more sustainable growth. Due to huge publicity of BP's oil spill, there was no evidence of the manipulation strategy.