I'm a engineer by training, and I was taught that:
risk = probability of something going wrong x resulting impact of that event
There's a big problem with this equation - it is out of sync with the public perception of risk. Our gut instinct is to fear one big accident much more than lots of little ones. So an air crash leading to the deaths of 100 people will get much more press coverage than 1000 car accidents killing one person in each accident.
There is a tendency to consider such risk perception as completely irrational, but in practice it provides an essential buffer to a number of metarisks (risks in measuring risks):
1. Mistakes - either mistakes in calculations, estimations and measurements, or not considering all the factors that apply. Such mistakes usually have much more serious consequences when working with high impact risks than in the case of lots of low impact risks.
2. Deliberate distortion of results - history is littered with cases of risks being deliberately played down in order to allow a project to proceed.
3. We tend to underestimate risks we are familiar with, or overestimate risks that we are unfamiliar with. Therefore people "in the know" tend to subconsciously play down risks.
So the public perception of fearing big impact risks balances the tendency of risk managers to make mistakes, be blasé or even, in the worst instances, distort results. The Gulf of Mexico oil spill was judged to have a negligible risk of the catastrophe occurring and a negligible impact - the latter prediction was certainly incorrect and the former is very likely to have been incorrect. Yet if you asked a member of the public whether drilling for oil in mile deep water is "risky", most would say "sounds like it to me".
Maybe we should trust our gut instincts a little more and our calculations a little less. But at the very least we should understand why the public perception of risks is as it is and use it as a spur to make sure that a 'rational' approach to risk management is not the result of wishful thinking.
So the hapless Tony Hayward is to go. I don't envy his reported replacement, Bob Dudley, in the least. He has to finalise the closing of the Gulf of Mexico leak, continue the clean up, and deal with the political and economic fall out, all within a poisonous atmosphere of blame and recrimination.
Here's a suggestion: resurrect "Beyond Petroleum". Instead of business as usual, why doesn't Dudley declare an energy revolution? Big Oil, along with coal, is at the root of all our carbon footprints, whether as individuals or organisations. Why not become a 21st Century energy company, providing low carbon, clean, safe energy to the masses and demonstrating that the change is feasible. The precedent is there with GM. When the motor giant came back from bankruptcy, it sold off the Hummer and invested in the Volt electric car. It even, it is alleged, considered changing the iconic blue GM logo green.
So BP could make a stand - declare an end to deep sea oil exploration, arctic wildlife drilling and tar sands. It could reinvest in renewables and bring the "Beyond Petroleum generation" - the execs who jumped ship into renewables start ups - back into the fold. Investing in talent, innovation and the future would restore faith in the organisation and make it part of the future rather than a relic of the past.
The alternative is chasing increasing elusive oil reserves while its customer base tries to find low carbon alternatives. That doesn't sound like a great business plan to me.
The opportunity is there - let's see if BP takes it.
I love running training workshops and the two Secrets of Successful Green Business Workshops I've run for Business Link in the last two days were corkers. We got about 30 people mainly from office based businesses in the Newcastle session and 25 on Teesside from a much wider range of businesses (from independent consultants through a prison to major chemical companies), and it was good to see a smattering of familiar faces at both. They were half day sessions and I structured them around The Three Secrets of Green Business - understanding the business case, what does green mean, and how to integrate it into your business. Frankly I prefer running whole day sessions - I only add about 20% more content and spend much longer on exercises - but there was still enough time for plenty of interaction.
And interaction I got! In Newcastle we had a lengthy debate about the pros and cons of telecommuting. I was challenged on the lack of social opportunities, but I maintain that the increased time you get with family and neighbours from not commuting is at least as rewarding as socialising with colleagues - or it should be anyway. On Teesside we had a discussion about the pros and cons of incremental innovation and disruptive innovation - we got a little sidetracked into innovation on the printing press/internet level rather than radical alignment of products, processes and supply chains to sustainability (à la TQM) which was the point.
The big learning area for me was the half hour slot that Gareth Williams of Business In The Community (BITC) did on climate change adaptation. This is definitely the Cinderella of environmental issues, but it is crucially important. Even if we slashed carbon emissions today, there is enough warming locked into the system that we do need to prepare for the impacts. Gareth covered risks and business opportunities. Now, while I have worked with clients to identify potential markets in helping others reduce their risks, I hadn't fully grasped how many purchasers are now taking resilience to any form of business interruption seriously in their buying decisions. So if you have your servers in a basement in a flood prone area you might be at a business disadvantage to a rival who has taken the necessary steps to protect their business. Every day's school day in this game - that's why I love it so much.
Just back from a superb 2 week holiday in the Yorkshire Dales. Askrigg, where we stayed, has its own bakery, microbrewery and dairy, loads of walking routes and some challenging cycling (with some gruelling 1:4 hills). That to me is pretty much heaven.
But it wasn't a complete holiday - every morning I was up at 5:30 working on my second book, The Green Executive, until 7:00 when the rest of the family started to stir. People often ask me how long it takes to write a book - my usual glib reply is "forever!". To give you an idea, that 18-odd hours of intense, uninterrupted effort was long enough to read through the entire draft manuscript once through, annotate changes and make the edits (but not those which require any research). I need to do that at least twice more...
Probably the biggest single challenge I face is persuading people to stop doing what they're doing and do something new. They nod and agree, most start doing the 'good' things, but few stop doing the 'bad'. "Business as usual" is like a security blanket impregnated with cyanide - you think you want to cling onto it, but it will kill you in the end.
I've written a whole chapter in The Green Executive describing what a sustainable economy might look like, and it's a heck of lot different from the one we've got now. Materials travel in cycles, toxins have been designed out and all energy is renewable. Products and services are designed not only to minimise material and energy flow, but also to enable sustainable behaviour in consumers.
It's pretty obvious, but to make that economy we need to do two things:
1. Start building the sustainable economy;
2. Destroy the old unsustainable economy.
Trying to straddle the two might at first be better than not acting at all, but as the transformation continues you will find yourself back where you started. Competition, rising costs, legislation, depreciation of assets, accusations of greenwash - they'll catch up with you in the end.
Try making two lists:
1. What are you going to do?
2. What are you going to stop doing?
It is the latter that will really drive innovation and allow you to leap ahead of the curve. But first you've got to let go of that security blanket.
Here's a great quote from the late management guru of all management gurus, Peter Drucker:
There is nothing so useless as doing efficiently that which should not be done at all.
We are obsessed with efficiency in the environmental movement, but efficiency is usually about being "less bad" rather than good. Sometimes we should just stop doing things rather than trying to do them efficiently. Nature is inefficient (how many seeds does an ash tree produce compared to the number of saplings that grow from them?), but it is sustainable and we're not.
So, what's the point in using a toxic material efficiently? On the other hand, energy efficiency makes renewable energy a more viable energy source. But don't assume efficient automatically means good.
... I'm off on my holidays tomorrow. We're spending a fortnight in Askrigg in the Yorkshire Dales - same house as last year as we enjoyed it so much. If the weather's as good as last year we'll be laughing, as the walking, cycling, scenery and lazing about is fantastic - I hope the bakery is still serving freshly baked croissants at 7am.
It's not a complete break, though. I've just printed off the complete manuscript for The Green Executive for the first time ever having slotted the interviews into place. This needs to be finished by the end of July, so I'll be putting in a couple of hours work every day.
Through the wonders of technology, I'll still be posting on Twitter, you might get a few posts here as well, and of course it's my day on the virtual working summit next Tuesday.