Case Study: Orica: Poor Crisis Communication and Management

Editor’s note: The following case study was submitted to us by Crisis Manager reader Antoni Lee, managing director of Australian communications firm Rhetorica. As Mr. Lee told us, “While the incidents themselves may now seem minor to some, the reputation and business damage is ongoing and significant.”

Orica Takes Medicine the Hard Way

It is a case of how crisis communication and management do about this situation.

Plant Discharges Cancer-Causing Chemical, Fails To Warn Public

At 6:30 PM on August 8, 2011, a loud bang came from Orica’s ammonia plant at Kooragang Island (NSW). Over the road, Karl Hitchcock’s kitchen shook.

One of Mr Hitchcock’s contractor buddies ran in saying, “Don’t go outside. It’s raining acid.”

The next day, Mr. Hitchcock noticed yellow spotting on parts of the boat parked in his front yard, and when he went over the road to work, he found a green film covering some of the plant equipment.

A kilogram of chromium-six had sprayed into the atmosphere, with some 60 grams of it falling locally onto the surrounding suburb of Stockton.

Neither the company nor the state government communicated with local residents until three days after the leak.

Panic and Speculation Fill the Information Vacuum

In the absence of official information, locals and the media were left to speculate — and to “freak out.”

In their distress, people naturally wondered: What had gone wrong? Had there been a leak? Was it toxic? Had it been contained? Was it safe to go outside…to work…to school? And frustratingly, Why hadn’t authorities or the company given locals any information about what was going on?

Immediate and intense media scrutiny filled the information vacuum. The narrative inevitably became about the evil chemical corporation versus “victims” in the local community.

NGO representatives and self-proclaimed experts readily fed hungry media stories about company practices, its history of breaches, chemical dangers, safety oversights, and failures — and the need for better, stronger regulation.

Among the reports claimed that Orica had also leaked arsenic, ammonium nitrate, sulphuric acid, and mercury vapor in a series of breaches at plants across the state.

The Wash-up is Never Clean or Easy

Google readily locates the harmful effects of chromium-six: skin allergies, nasal septum perforation, lung cancer, asthma symptoms, thick rashes, scarring, and crusty skin sores.

Thankfully, no one (that we know of) was physically harmed as a result of the Kooragang Island accidents. What did happen? While Orica survived and is performing strongly in several areas, it has suffered financially and its reputation is damaged:

1. Local resident pressure and global media coverage embarrassed and forced the State’s newly elected Premier, Barry O’Farrell, to apologize to the public and commit to an overhaul of state environmental law.
2. Initial Environment Protection Authority (EPA) and Department of Health reports damned the company.
3. In the face of publicly perceived arrogance and incompetence, Orica shut its Kooragang Island plant for several months. The Premier threatened the company with a loss of license to operate.
4. The short-term hit to company revenue was $90 million.
5. In the wake of heavy criticism, Orica’s Australian chief, Graeme Liebelt, left the company six months earlier than planned.
6. A subsequent NSW upper house committee inquiry strongly criticized the Minister for Environment, Robyn Parker, as well as Orica, for the “unacceptable delay” in notifying the public and for causing “unnecessary community distress”.
7. The company was fined some $9 million.
8. Class legal action is pending.
9. Orica is spending (at least) tens of thousands of dollars trying to heal the lack of trust it now has with local communities.
10. Resulting in legislative changes that require companies to report faster and impose heavier fines for breaches. The EPA has more power.

The Hard Lessons Everyone Already Knows

After a crisis of communication and management, everyone has an opinion about what beleaguered companies did wrong and what they ought to have done. Judgments always cover not only the crisis incident but how the company responded (or not).

Karl Hitchcock again: “People eat their vegetables out of their gardens. And this stuff would have gone all over them. I think they handled it very poorly. The communication is what really got me.”

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For more resources, see the Free Management Library topic: Crisis Management
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by Antoni Lee, Managing Director, Rhetoric

Jonathan & Erik Bernstein