Bhopal to BP – Lessons to be Learnt

08 Jun 2010 – Shankar Venkateswaran

“Union Carbide has a moral responsibility in this matter, and we are not ducking it.” Union Carbide CEO Warren Anderson, quoted in Time Magazine, December 24, 1984

Given the wall-to-wall media coverage of the Deepwater Horizon tragedy, a significant development in Bhopal – the site of the world’s worst industrial accident – has largely slipped under the media radar. On June 7, 2010 – just a few weeks after the Gulf of Mexico rig exploded with the loss of 11 lives and huge environmental consequences – a court in Bhopal finally passed sentence on the criminal case against Union Carbide managers involved. It was 25 years ago that a large volume of lethal methyl isocyanate leaked and killed up to an estimated 20,000 people and compromised the health of hundreds of thousands. Six company officials – all Indian, including its non-executive chairman and industrial doyen Keshub Mahindra – have been sentenced to two years’ imprisonment. Warren Anderson, then Chairman of Union Carbide Corporation (UCC), the majority shareholder of the Indian subsidiary, whose “escape” from Bhopal a few days after the disaster was apparently facilitated by Indian government officials, was not even charged as all attempts to extradite him have failed.

Frankly, the victims of Bhopal have continued to be failed by those who were most expected to protect their interests. The Government of India – both at the time, and successive administrations – has been the chief betrayer, first assuming all responsibility to represent the victims in court through an Act of Parliament and initially claiming compensation of $3.3 billion, but then agreeing to an out-of-court settlement with Union Carbide for just $470 million. The settlement was followed by a decade of incompetence with the majority of the compensation funds not distributed to the victims. Nor has the Madhya Pradesh state government been effective in providing health support or in cleaning up the abandoned site which it took back under its control from Union Carbide India’s successor, Eveready Industries, in 1988.

The Supreme Court of India, the one institution that retains the respect of most Indians, has not covered itself in glory either. It judged the level of compensation to be adequate and reduced the original criminal charges filed against the company of culpable homicide to criminal negligence which could attract a maximum sentence of two years imprisonment. The June 7 sentence was therefore as unsurprising as it was disappointing.

Five years ago, SustainAbility’s groundbreaking report The Changing Landscape of Liability included a chapter which challenged Dow’s claim at the time of their acquisition of UCC that ‘We have no responsibility in this matter. There is nothing more we can do.’ It concluded that there are multiple issues outstanding which Dow could and should address more actively. These included Dow’s position on the outstanding homicide charges against Union Carbide and Warren Anderson in India.

It is notable that Dow has not only refused to have its subsidiary appear in Bhopal to face outstanding charges but has also sought to have any potential liability formally precluded by the Indian government in 2006, CEO Andrew Liveris wrote to the Prime Minister of India’s Principal Secretary to ensure that the Indian government reversed a decision by the Ministry of Chemicals and Fertilisers to make Dow a party to legal action in relation to site remediation. In the letter he writes: ‘It follows logically from the GOI’s (Government of India’s) statements regarding the non-liability of Dow, that the Ministry of Chemicals and Fertilizers should now withdraw its application for a financial deposit against remediation costs. Certainly a withdrawal of the application would be a positive, tangible demonstration that the GOI means what it says about Dow’s lack of responsibility in the matter’.

The letter closes with a suggestion that future investments in India by Dow would be facilitated by this move. ‘Our common goal is to support economic growth in India, including key foreign investments that will promote job creation, economic diversification and technology updates. Thank you for your efforts to ensure that we have the appropriate investment climate to facilitate forward-looking investment and business partnerships.’ It is not difficult to read between the lines.

A range of other issues remain unaddressed. Critics point to evidence that safety standards in the Bhopal plant were well below a comparable facility it operated in the US. Greenpeace has claimed that some thirty major hazards identified internally in a 1982 safety audit were addressed in the US facility but were ignored in India. If this was true, the Bhopal facility was a ticking time bomb and everyone – in the Indian operations and globally – who could have addressed the shortcomings chose to do nothing! Is this not a clear case of double standards? Multinationals are often charged with maintaining very low standards of corporate behaviour in countries that have weak laws and governance systems and this case does nothing to dispel the charge.

The factory site now stands largely as it was when abandoned by UCC including huge rusting machinery; piles of hazardous chemicals locked inside an on site shed; and contaminated soil across the site. The boundary walls have been breached in several places and children play while goat herds wander in and out in spite of the 24 hour security guards. Other issues outstanding include Dow’s accountability for ensuring a just outcome for the victims; and the bearing of Union Carbide Corporation’s majority holding in its Indian subsidiary (against prevailing Indian policy) on its liability position.

Far from addressing these issues, Dow has consistently adopted a purely legalistic approach. On the matter of compensation, the company maintains that it acquired UCC some ten years after the latter paid out $470 million in compensation. On the issue of remediating the site that continues to pollute, the company argues that since it acquired UCC after the latter had divested its interests in the Indian subsidiary, it has no responsibility – let alone any liability.

But the purpose of this commentary is not simply to critique the disappointing behaviour of all the actors concerned with Bhopal but to see if there are lessons for those of us who work on issues of corporate responsibility. It is widely accepted today that a responsible company is one whose sustainability standards are internally consistent, irrespective of where it operates. And that responsible behaviours should reflect the values of the company rather than what is legal. Since laws are generally a lagging indicator of shifts in societal values and expectations, corporate responsibility is necessarily about setting and working to standards well beyond compliance with the law. It is surely unacceptable to apply these principles selectively?

There are two interesting postscripts to this Bhopal verdict. First, while it has occupied considerable time in space in Indian media, there has been a deafening silence from India’s corporate community. They have neither graced the TV studios nor have any of their statements been reported in the press. What is one to make of this? Corporate India does not want to take a stand, but why? Is one to assume that in their view, neither UCC nor Dow is responsible or liable? Or is the issue of protecting inward investment by Dow a more significant consideration than an equitable outcome for victims in terms of both legal and moral liability?

Second, India is betting on nuclear energy to part solve its electricity generation problems and is formulating a bill to regulate liability of nuclear plant operators and equipment manufacturers in case of accidents. Reports in the press suggested that the proposal is to restrict liability in the case of a catastrophe to the equivalent of $100 million, while exempting the supplier completely, apparently on the insistence of the US Government (who signed a nuclear cooperation agreement with India in July 2005). While the need for defining liability in case of a nuclear incident is welcome, will such limits motivate corporations to invest in safe design and operations?

The Bhopal experience also brings us back to BP. The 1984 tragedy led the chemicals industry to implement its Responsible Care programme to avoid the possibility of a repeat: BP is a signatory. Given recent events, it would seem that one of the basic lessons acknowledged by Union Carbide a quarter of a century ago has failed to make it into current best practice. As Union Carbide’s CEO said at a 1985 press briefing: “That’s why you need the redundancy. Built into the safety system are a whole series of capabilities that can take care of whatever inadvertent action or commission has taken place so you’re not all dependent on just one item to either make it safe or make it unsafe.” The capping of the well in the Gulf of Mexico offers the prospect of welcome relief from the endless images of the massive environmental damage it has caused. It is essential, however, that the underlying corporate responsibility challenges do not disappear into history as has been the case with Bhopal.