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MARKETING Study: Green Advertising Helped BP Recover from the Deepwater Horizon Spill by Walter FrickFEBRUARY , Greenwashing works tha s one interpretation of a recent working paper from the National Bureau of Research examining the impact of advertising on oil company BP. In the paper, economists from the University of Maryland, University of Michigan, and Brown set out to measure the influence of B s pre-spill green advertising campaign on the compan s performance following the 2010 Deepwater Horizon oil spill. Using gas prices, sales, and station affiliations, as well as data on B s ad spending, the researchers reach a troubling conclusion: consumers did “punish” BP temporarily following the spill, but that punishment “was sign cantly reduced by pre-spill exposure to BP advertising during the Beyond Petroleu campaign years.” In other words, green advertising functioned as an insurance policy against the cost of an environmental disaster.Her s an example of the BP “Beyond Petroleum” campaign that ran from 2000 to 2008: VIDEO AVAILABLE ONLINE TO VIEW, PLEASE VISIT THIS ARTICLE AT HBR.ORG Ads like this one seem to have had a measurable ect on consumer purchasing decisions in the wake of the largest shore oil spill in U.S. history. Spec cally, the researchers reached three notable ndings: COPYRIGHT HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. 1.Consumers punished BP temporarily. The result was a 4.2% decline in the compan s prices relative to competitors and a 3.6% decline in sales, by the researcher measure. But this response peaked in August 2010, approximately four months after the disaster. The paper suggests that this nding supports a model of consumer behavior that seeks to punish bad behavior, rather than an updating of beliefs about a company and its practices that would suggest a longer term consumer response.
2. The environmentally conscious punished BP more, while the rich punished it less. In order to test their hypothesis that environmentalists would react more harshly toward BP, the researchers created a measure of environmentalism for a given geographical area. This measure combined hybrid registrations, membership in the Sierra Club, LEED-cert ed green buildings, and donations to the Green Party. By this metric, “punishment was sign cantly more intense in greener areas.” But ther s a catch: all else equal, higher income areas tended to punish BP less harshly. And because higher income communities tend to be more environmentally conscious, the two factors basically canceled each other out.
3. The more BP had spent on advertising in an area pre-spill, the less severe that are s punishment. This result held true for multiple measures of advertising, including one that accounted for ads during the spill. Not only did consumers punish the company less at the pump, the measure of station affiliations capturing whether a station owner changed brands in response to the spill was impacted by ad spending as well. In areas with low pre-spill advertising, BP lost some stations; in areas with high pre-spill advertising, switching was sign cantly less common.
I s important to note that the paper has no formal mechanism for distinguishing the impact of green advertising from advertising in general. So in theory i s possible that this ect could be achieved by any old ad campaign. But that is not the researcher interpretation. As they put it, “Our results imply that consumer value of environmental stewardship may give rms incentives to greenwash” because “green advertising plays more of a persuasive role than an informative role, shifting beliefs rather than providing information about and commitment to environmental quality.” According to the authors, the ndings “suggest a role for government (or other organizations) to monitor environmental stewardship claims, and to provide additional regulatory incentives for rms to internalize the environmental repercussions of their production decisions.” Without such monitoring, greenwashing is likely to proliferate for the simple reason that it seems to work.
Walter Frick is a senior associate editor at Harvard Business Review. COPYRIGHT HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. Copyright 2014Harvard Business Publishing. AllRights Reserved. Additional restrictions may apply including theuse ofthis content asassigned coursematerial. Pleaseconsult your institution's librarianaboutanyrestrictions thatmight applyunder thelicense withyour institution.
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