Advertising and Environmental Stewardship: Evidence from the BP Oil Spill

Area of Science:

• Environmental Economics
• Corporate Social Responsibility
• Marketing

Background:

• Private markets play a role in incentivizing environmental stewardship.
• Consumer responses to corporate environmental incidents are critical for market accountability.
• Green advertising is a common corporate strategy to enhance brand image.

Purpose of the Study:

• To investigate if private markets can incentivize environmental stewardship.
• To analyze consumer response to the 2010 BP oil spill.
• To determine the effect of BP's "Beyond Petroleum" green advertising campaign on consumer response.

Main Methods:

• Examined consumer response to the 2010 BP oil spill.
• Assessed the impact of BP's "Beyond Petroleum" green advertising (2000-2008) on market outcomes.
• Analyzed BP station margins and sales volumes post-spill.

Main Results:

• BP station margins and volumes declined significantly post-spill, indicating consumer punishment.
• Pre-spill green advertising by BP dampened the negative consumer price response.
• Green advertising may have reduced brand switching away from BP stations.

Conclusions:

• Firms may have incentives to invest in green advertising independently of environmental stewardship investments.
• Green advertising can potentially mitigate negative market consequences of environmental incidents.
• The study highlights a potential disconnect between environmental claims and actual stewardship in corporate marketing strategies.