New Left Project • 20 December 2011
A Social License to Operate
by James Marriott
In the wake of the news that several of major UK arts institutions have decided to renew sponsorship deals with BP, we present the first of two excerpts from Not if but when: Culture Beyond Oil, a new publication that sets out the case against oil sponsorship of the arts. Here, James Marriott from Platform discusses the dependence of oil companies on having a ‘social license to operate’ and how arts sponsorship is used to construct this.
An oil corporation such as BP combines the mindsets of an engineering company and a bank. It constantly faces the practical challenges of extracting, transporting and processing oil and gas, shifting the geology of distant lands to the cars and turbines of its customers. Like all engineering problems, these challenges are approached in the belief that ultimately they can be solved. The point of solving them is to make money, profit on invested capital.
The construction of an offshore platform is one of the most expensive projects on earth in the 21st century. Usually, it can only offer a high return on capital if oil production is maintained over two or three decades. The maintenance of this production is usually threatened by social and political shifts in the countries of extraction. Any such threat to production – or the perception that that threat might exist – can immediately undermine the profitability of a corporation. In May 2010 BP’s share value was almost halved by the Deepwater Horizon disaster in the Gulf of Mexico, not because of the potential costs of the oil spill clean up, but because investors were concerned that the company’s future prospects in the US were being undermined by the collapse of support in Washington and in the media.
To guard against any such threat to the company’s value, BP works constantly to engineer its ‘social licence to operate’. This is a term widely used in business and government circles and usually applies to the process of engendering support for a company’s activities in the communities who live close to their factories, oil wells, etc. However it can help us understand how corporations construct public support in states far from those places of extraction or manufacture – for example how BP builds support in London.
The financial drive for international oil companies to continually increase the amount of oil and gas they extract often leads them to places of extraction that are high risk, either technically, as in deepwater offshore, or politically, as in Libya. The UK government can be of great assistance to the likes of BP in guarding against these risks. The Labour government assisted BP in gaining access to oilfields in Gaddhafi’s Libya, the Conservative/Liberal Democrat coalition government will no doubt be assisting BP in gaining access to oilfields in post-Gaddhafi Libya. In the summer of 2010, a large swathe of the British political establishment called on the White House to ‘stop bashing BP’ – support that assisted the company in persuading President Obama to say on TV: “BP is a strong and viable company and it is in all our interests that it stays that way”.
To construct and maintain this support, BP focuses on building a positive image in the eyes of politicians, diplomats, civil servants, journalists, academics, NGOs and cultural commentators. These groups are known as the ‘special publics’ or ‘clients’ in the public relations industry. The corporations often contract external PR companies to carry out this work, such as Fishburn Hedges, who won an industry award for the Special Publics Engagement Programme that it created for Shell in 2009:
“Our Special Publics Engagement Programme is a key element of our corporate communications mix and is fundamental to sustaining a positive view of Shell among key decision makers and influencers around the world. And we know it works – almost three quarters of those that come into contact with Shell through our partnerships around the world go away with an improved view of our company. Fishburn Hedges has been central to that work for a long time – and this award is well-deserved recognition for the excellent job that they do.”
Building a supportive attitude within the ‘special publics’ can be done through direct engagement and dialogue, through advertising, and through financial support – funding academic posts at universities, creating programmes in schools, financing sports such as the 2012 Olympics, or sponsoring culture.
Each of these actions is helpful in assisting the construction of the social license to operate, as well as boosting employee morale and polishing the company’s brand, as pointed out by Rena De Sisto, global arts and culture executive at Bank of America Merrill Lynch (that contributes $40m a year to the arts worldwide):
“There are plenty of big corporations that do not support the arts, because they labour under the misapprehension that they are something extra, instead of a key marketing tool. If more [of them] knew how effective the arts can be in terms of employee morale, client outreach and burnishing your brand, they would be surprised and delighted.”
This support is not provided as a form of philanthropy, but as an integral part of engineering the social and political circumstances that will best ensure the long-term security of those investments in oil and gas projects. Approached as an engineering challenge, the corporation tends to see all opposition to its activities as solvable with the appropriate time, capital and techniques. The sponsorship of institutions such as Tate can be understood as just one of these tactics to ensure the security of assets and the return on investments.
The success of this strategy is illustrated by the remark of Nicholas Serota, Director of Tate, in the Summer of 2010, that: “You don’t abandon your friends because they have what we consider to be a temporary difficulty”. BP had just created one of the worst spills in the history of the oil industry, and desperately need the support of allies to shore up its position. The public endorsement of arguably the most senior figure in the British cultural sector was of immense value in building support in the political establishment.