BP faced both institutional and actionable legitimacy crises following the 2010 Deepwater Horizon oil spill. To repair its legitimacy, BP used non-financial disclosures and image repair discourse strategies in annual reports and sustainability reports. While BP acknowledged responsibility for the spill, it did not fully admit mistakes. BP resigned Tony Hayward but defended his contribution. BP also blamed photographers for altered spill photos rather than taking responsibility. The key factor was whether BP used strategies to restore institutional legitimacy through responsible actions or just actionable legitimacy regarding specific responses.

1. Restoring legitimacy in order to remain
sustainable- BP CASE
Presented by Yulhendri Saputra & Marcel Bernadi

2. Introduction

3. Introduction
Purpose of the paper:
While sustainability from a
medium to long term perspective
has been the focus of the majority
of research this paper focuses on
steps taken by the BP oil
Company, when facing the worst
environmental disaster in history,
to restore their legitimacy.
Findings of paper:
The analysis found that non-
financial disclosures together with
image repair discourse strategies
were used by BP, to repair
organizational legitimacy.
Practical Implications:
With renewed emphasis on the
importance of sustainability to the
business environment, this paper
contributes to an understanding of
how organizations use
sustainability reports to restore
legitimacy
Originality value: Complimenting
Hearit's strategy with semiotics,
this paper adds and
extends the literature by studying
the use of image repair discourse
and semiotics in the
annual and sustainability reports

4. Introduction of Deepwater horizon - US
Deepwater Horizon was an ultra-
deepwater, dynamically position-
ed, semi-submersibel offshore oil
drilling rig own by Transocean.
Built in 2001 in South Korea by
Hyundai Heavy Industries, the rig
was commissioned by R&B
Falcon, which later became part
of Transocean registered in
Majuro, Marshall Island, and
leased to BP from 2001 until Sept
2013. Deepwater Horizon was
built for R&B Falcon (which later
became part of Transocean).
Construction started in December
1998, the rig was delivered on 23
Feb 2001 the rig was registered in
the Republic of Panama

5. Introduction of Incident
On 20 April 2010 an explosion on
Deepwater Horizon, off the Gulf of Mexico
sank the deep water oil rig and killed 11
workers. The Deepwater Horizon spill was
not the first oil spill in the gulf, but what
made the Deep Water Horizon disaster
different, was that for the first time in history
the public could view live streaming of an
environmental disaster on television.
Initially, after the explosion Hayward, CEO
of BP at the time of the disaster estimated
that the oil spill would have very little
impact. Estimates of the quantities of the oil
spill were not clear and varied greatly,
what soon became clear, was that the
parties involved quickly blamed each other
for the spill, which had resulted in the
widespread pollution

6. Introduction of Incident (cont)
• The drilling contractor company, Halliburton cemented the well, after
it was decided to temporary abandon the well, despite it being found
to be commercially viable.
• The cement was supposed to stop any oil and gas from bursting into
the well pipe. Owing to numerous errors the oil and gas vented onto
the rig directly, causing the heating ventilator and oil air conditioning
systems to carry a gas rich mixture into the engine room and 2 huge
explosions to occur.
• The explosion not only injured 17 and killed 11 workers, but also led
to the worst offshore oil spill in the United States (US) history (De
Gravelles & de Gravelles, 2011). Estimates of the oil spill varied
greatly ranging from an initial conservative 1000 barrels a day to
anything between 35 000 to 60 000 barrels per day (King, 2010) with
at the end of 86 days, an estimated 4.9 million barrels of oil leaking
in to the Gulf of Mexico destroying over 400 species of wild life and
hundreds of meters of fragile coastline. (Guarino, 2010).

7. Introduction of Incident (cont)
• The three companies, BP, Transocean and Halliburton blamed each
other for the disaster and Transocean also blamed Cameron, a
manufacturer of valves (Milbank, 2010). Others blamed the
Departments Minerals Management Services for rubberstamping‟
BP s drilling projects without ensuring that BP has a proper response‟
plan in place in case of an oil spill (Eilperin, 2010). According to the
Washington Post, (2010).

8. Alternatives Course of Actions

9. A theory of organisational legitimacy
A number of dimensions to legitimacy have
been identified (Shoemaker 1982; Yoon,
2005). These include legality, evaluation,
viability, stability and credibility. Yoon (2005, p.
765) goes so far as to suggest that “legitimacy
may be a reflection of whether an organization
has the competence and resources necessary
for achieving its goals”
•If institutional legitimacy matters at the macro
level of analysis, actionable legitimacy matters
at the micro level of analysis.
•Actionable legitimacy is achieved when an
action is perceived by publics as being
undertaken within the institution's realm of
authority and thus inspires public confidence in
the institution. Boyd (2000)

10. The case of BP
• According to the 2009 Annual report
BP operates at the forefront of the
energy industry. BP mentions that it
operates from deep beneath the ocean
to complex refining environment. In
both its 2009 Annual review and its
2010 Summary review BP highlights it
capabilities and strength but also
refers
to the risk of operating in areas which
provide severe physical, technical,
intellectual and geopolitical challenges.
• Hayward (2009) said that “We
continue to show our ability to
take on and manage risk, doing the
difficult things that others either can
door choose not to do.

11. Result and discussion of result
• The question then was not was BP
having a legitimacy crises, but what type
of legitimacy crises. This section
examines what type of legitimacy BP
faced and how the legitimacy challenge
BP faced was repaired through the use
of image repair discourse supplemented
by semiotics.
• Discussions and media remarks it was
evident that the messages in the public
arena about BP were not favorable.
From the 2010 Summary it is evident
that BP understands the role that
legitimacy plays in its operations.

12. Result and discussion of result (Cont)
• Although Boyd says actional
legitimacy is more common, and
that institutional legitimacy only
occurs when organizations have
to demonstrate legitimacy of
their entire enterprise.
• In contrast to the group photo of
the board of directors in the 2010
Annual report the 2009 Annual
report contains individual photos
of both the Chairman Svanberg
and depicted CEO Hayward

13. Result and discussion of result (Cont)
The resignation of Tony Hayward can be
classified as a matter of institutional
legitimacy, but rather that of actionable
legitimacy. With the chairman's words in the
2010 Annual reports he attempts to
demonstrate the legitimacy of his action of
replacing Tony Hayward.
Reading the annual reports it is clear that in
the matter of the edited images, it became a
matter of actionable legitimacy
Establishing from the annual exports that BP
faced both actionable and institutional
legitimacy challenges, it is clear that action
had to be taken to restore legitimacy
Tony hayward

14. Result and discussion of result (Cont)
Summary review (2010) the
Chairman says “the accident
should never have happened.
We are choked and saddened
that it did.” yet does not admit
BP s mistakes.‟
“..Was a very, very low
probability event, by BP and the
entire industry…?” however
Dudley acknowledged BP„s role
in this event by saying “As a
responsible party,…we knew
we would face wide ranging
claims and potential fines”
(Annual report 2010). But again
does not admit BP s mistakes‟ .
Sustainability Review (2010) BP made
extensive use of images, placing 57
pictures dealing with the disaster. Of the
total pictures only 10 depicted no
humans and the majority of the pictures
were of 2 or more individuals looking
either concerned or caring.

15. Result and discussion of result (Cont)
In resignation of Tony Hayward The board
was saddened to lose someone whose long-
term contribution to BP was so widely
admired. These words seem to indicate no
form of apologetic behavior either in the form
of apology or apologia, it rather appears that
BP is defending its former CEO and hence its
action.
Flicker account (2010) providing information
on the altered images, clearly tries to lay
blame for this on BPs contract photographers
and the terms of use of any of the images
state “that the images are provided in good
faith and that amongst others these images
will not be used in connection with any
purpose that is prejudicial to BP… “This
signals that BP did not take an apologetic
view to repairing its image regarding the
altered image matter.

16. Key Success Factor

17. The factor is to establish whether BP used
institutional or actionable legitimacy repair
strategies in response to the Deepwater
Horizon incident. For an organization to
have institutional legitimacy, its
stakeholders must perceive it to be
responsible and act in accordance with
societal norms.
These conditions not only made the public
question BP s actions, but also appeared‟
to threaten BP s sustainability‟ . This paper
draws on the theories of organizational
legitimacy and image repair discourse.

18. Reference
Vida L Botes and Grant Samkin
University of Waikato, Hamilton, New Zealand
Thank you