Self regulate or be exposed
July, 2009
Business Admin prof studies practices that lead to failure
On April 2nd, 2009, Suncor, the world's second largest producer of oil sands crude, was fined $675,000 for not installing pollution control equipment at one of its plants near Fort McMurray, Alberta. In a gratifying turn for academics, the Provincial Court of Alberta applied something new called creative sentencing, which, in part, results in a $315,000 research project for new SFU assistant professor Stephanie Bertels in the Faculty of Business Administration. Bertels shares the funding with co-investigators Frances Bowen and Harrie Vredenburg at the University of Calgary where Bertels did her PhD. The project will examine the nature of Suncor's violation to develop new best practices for regulatory compliance as well as exploring the benefits of creative sentencing for improving the organizational learning process.
Before coming to SFU in the Fall of 2008, Bertels spent two years as a postdoc at University of Michigan in the Erb Institute for Sustainable Global Enterprise and several years working as an environmental consultant. The iron ring on her little finger indicates an engineering degree from Queens. She also has a Masters from Stanford and spent four years in the Burnaby office of Golder Associates as a professional engineer. Her PhD thesis looked at the challenge of ensuring the safety of municipal drinking water systems. With plenty of experience in the area of corporate compliance to government regulations, she says, "It's not usually a big event like an oil spill that gets you into trouble. It's forgetting to submit an update report. One little error triggers a whole process that then uncovers other problems."
Bertels says Suncor generally has a good reputation as a socially responsible corporate citizen, "They're a company trying to be good within an industry that faces a lot of scrutiny. It took courage on their part to propose a study like this." One of the outcomes of the project will be a two-day workshop in Calgary with regulators and senior management from across the oil and gas industry attending a forum that uses the details of the case to discuss best practices in the industry. "No corporation likes anyone to look under their skirt. In doing this, Suncor has agreed to give everyone a good look at their bloomers," says Bertels. The hope is that in doing so, they can help improve compliance across the industry.
So how do companies that are trying to be good still end up doing bad things? Bertels points to James Reason's Swiss cheese model of system accidents. Complex systems can be thought of as multiple layers of swiss cheese. Each layer has holes. The idea is to have enough redundancy throughout the system so the holes never line up and let something bad make it all the way through. Bertels has seen countless ways systems can fail due to simple human activities which are nobody's fault. For instance, a person could go on holidays, or it could be someone new to a position, or someone changing jobs within the organization. In Suncor's case, a system that called for a vapour recovery unit to control air emissions was replaced at the design stage by a different system. The associated permit was not properly amended to reflect the new design and it took Suncor years to realize the mismatch between the permit and what was actually installed. When the time came for inspection, the vapour recovery unit was not there.
Bertels says, "A focus on business efficiency has led to managers searching for ways to reduce redundancies." But this usually means removing one or more slices of swiss cheese, increasing the risk that something will be missed. The Suncor project is a rare opportunity to get open access to the internal practices of a large corporation. Bertels and her team will have access to reams of documents from the court case, papers collected through the legal discovery process as well as the opportunity to interview employees and regulators about the case. "The impressive thing about this case is not the source of funding, but the access the company is giving us," says Bertels. "The business literature often calls for studies of failures, so this research matters because we have a chance to do just that. What's more, this is a subtle failure. It's not as simple as someone forgetting to turn off a valve. It involves the everyday mundane boring practices that it takes to keep people and systems safe."
Creative sentencing is a new idea in Canada that only exists in Alberta and Newfoundland & Labrador. "We don't have it in BC right now, but perhaps the BC Minister of Justice could look into it," says Bertels. In the meantime, she suggests that BC researchers partner with colleagues in Alberta or Newfoundland where increasingly more creative sentencing cases are directing corporate fines toward academics. In the Suncor case, Bertels became involved through the International Resource Industries and Sustainability Centre (IRIS) at the University of Calgary which is well known for its work on corporate sustainability.
Bertels adds that although she is trained both as an environmental engineer and an organization theorist, she enjoys teaching in a business school. "I can have way more impact than preaching to the choir in an environmental studies program," she says. She challenges business students to think about sustainability issues, something they might not ordinarily imagine to be part of their training. In fact the SFU Faculty of Business Administration is gaining a solid reputation for their expertise in sustainability. Besides Bertels, several other business faculty work in the area of sustainability and corporate responsibility including Jeremy Hall, Carolyn Egri, John Peloza, and Irene Gordon. "The SFU school of business has some truly fantastic researchers in the area of sustainability and that's what attracted me to come work at SFU," says Bertels.