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Fortune 500 Sustainability-Part 1
BP has a main four-part sustainability strategy that it utilizes, as well as a few additional components that comprise that strategy. The company's approach to funding sustainability projects varies by project. The examples of BP's sustainability spending that we found ranged between $10 million and $500 million.
Findings
1. BP's Sustainability Strategy
A. Four-Part Sustainability Strategy & Strategic Framework
- BP has a four-part sustainability strategy. First, BP is "[g]rowing advantaged oil and gas in the upstream." In support of that pursuit, BP is investing more money in gas and oil and then producing those products more efficiently.
- The second part of BP's sustainability strategy is to achieve what it calls "[m]arket-led growth in the downstream." To do so, BP is working to innovate through strategic partnerships and through the use of advanced products.
- The third component of BP's sustainability strategy involves "[v]enturing and low carbon across multiple fronts." In support thereof, BP is "[p]ursu[ing] new opportunities to meet evolving technology, consumer and policy trends."
- Lastly, the fourth part of the company's sustainability strategy involves what it describes as"[m]odernizing the whole group." To do so, the company is working to improve its productivity by using digital solutions and simplify its processes overall.
- BP's CEO, Bob Dudley, addressed the company's sustainability strategy in the following statement, which he described as "our strategy to grow advantaged oil and gas in the upstream; market-led growth in the downstream; pursuing low carbon growth opportunities and modernizing the group."
- An integral part of BP's sustainability strategy is its framework which it calls "reduce, improve, create." That framework emphasizes the company's work towards lowering its emissions of greenhouse gases as part of its business operations, bettering its products so that consumers/customers can reduce their greenhouse gas emissions, and developing businesses that are low carbon.
- BP's sustainability strategy is also designed to be in accordance with the goals outlined in the Paris Agreement. As BP's CEO stated: "We firmly believe our strategy is consistent with the climate goals of the Paris Agreement . . . ."
B. Additional Elements of BP's Sustainability Strategy
- In addition to BP's overall sustainability strategy outlined above, that strategy also involves other elements. The first of those additional elements is that BP's sustainability strategy involves collaborating with other entities that are also pursuing sustainability goals. For example, BP has partnered with the Oil and Gas Climate Initiative in an effort to address emissions of methane and develop ways to capture, store, and use carbon.
- The second additional element of the company's sustainability strategy is to develop long-lasting relationships with customers, partners, governments, communities, and suppliers in areas where the company operates.
- The third additional element of the company's sustainability strategy is to operate in a safe and responsible manner and, according to the company, safety is its top priority. BP CEO Bob Dudley addressed that part of the company's sustainability strategy in stating: "Only by operating as a responsible and reliable business do we earn the trust of investors and society more widely — trust that is essential for BP to fully play its part in advancing a low carbon future and human progress."
2. BP's Approach to Funding Sustainability Projects
- Overall, BP's approach to funding sustainability projects varies by project.
- The company's approach to funding sustainability projects involving technology is to "selectively invest in areas with the potential to add greatest value to . . . [its] business, now and in the future, including building lower carbon businesses." Furthermore, BP's approach to such involves "invest[ing] in small high-tech companies to help accelerate and commercialize new technologies, products and business models." In so doing, BP is "focus[ed] . . . on five areas that are core to . . . [its] strategy for advancing the energy transition: [A]dvanced mobility, bio and low carbon products, carbon management, digital transformation and power and storage."
- BP values its investments involving technology because new technologies enable the company to produce energy in a more efficient and safe manner.
- BP's approach to funding sustainability projects involving renewables is focused on the following types of energy: Solar, wind, biopower, and biofuels. The company has "been investing in renewables for many years."
- The company's approach to funding sustainability projects also involves investing more in gas and oil and then producing those products more efficiently.
- BP also detailed its approach for how it determines which sustainability issues to include in its annual sustainability report. Though the company doesn't outright state that said process pertains to its project-funding approach, the wording seems to infer that to be the case nonetheless (which is why we included it). BP begins that explanation by stating that it "conduct[s] a materiality review to evaluate the issues that matter most to . . . [its] stakeholders and . . . business."
- Next, the company mentioned that it met with approximately 100 organizations, such as business partners and investors, that are part of its top stakeholder groups.
- With respect to the sustainability issues discussed with the aforementioned organizations, BP stated that it prioritizes those issues based on (1) the level of importance that its stakeholders attach to them and (2) how those issues "could impact BP’s ability to deliver its strategy."
- Thereafter, BP validates that information with staff from its "group risk, environment, human rights and society, government and political affairs, upstream, downstream, policy and technology teams, . . . [and] board-level safety, ethics and environment assurance committee."
3. Sustainability Spending
- Each year, BP invests "$500 million . . . in low carbon activities," which includes its renewables acquisitions and businesses. Of that amount, approximately $200 million is spent on "develop[ing] options for new lower carbon businesses in five areas that are core to . . . [its] strategy for advancing the energy transition." The company believes that the aforementioned areas are ones that "have the potential to make a real contribution to . . . [its] future and build resilience in existing operations."
- Low carbon companies that BP has supported from the aforementioned investment amount include Voltaware (energy consumption monitoring) and FreeWire (charging for electric vehicles).
- BP also directs some spending on sustainability to the Oil and Gas Climate Initiative's technology and research fund, though that amount was not reported.
- BP announced its "plan to invest $200 million over a three-year period" in Lightsource BP (solar energy company), so that it can expand globally.
- Earlier this year, BP announced funding in the amount of $100 million that will be used "for new emissions reductions projects in . . . [its] upstream operations."
- BP has invested $10 million as part of a fund raised by NIO Capital seeking to improve the quality of urban air in China. That funding will be used to "support the development of advanced mobility opportunities, including electric vehicles, new energy infrastructure and batteries."
4. Sustainability Advertising Spending
- While information about BP's sustainability advertising spending was not publicly available, we learned that in "January 2019, BP launched its first international corporate advertising campaign in more than a decade." That sustainability advertising campaign is titled "Possibilities Everywhere" and consists of "a series of TV ads and high-profile display advertising across the UK, Germany and US to profile the variety of approaches BP is using to increase production whil[e] lowering carbon emissions."
Your research team applied the following strategy:
The only data point we couldn't find information about was BP's sustainability advertising spending. We looked for that information in three different ways. First, we reviewed BP's 2018 Sustainability Report, as we thought that perhaps such information might be included therein. However, no advertising spending whatsoever was mentioned in that report. Second, we conducted wide-ranging, general searches for any articles discussing the company's sustainability advertising spending. The only results that method yielded were articles about specific advertisements that the company has aired over the past decade or so, but no applicable spending data was mentioned in those articles. As a third strategy, we tried to find information about the company's most-recent sustainability advertising campaign called "Possibilities Everywhere" because that would have at least provided insight regarding the extent of BP's sustainability advertising spending. We looked through a series of articles published about that advertising campaign from advertising industry and energy industry sources, but none of those articles provided any information about the cost of that ad campaign.
With respect to the other information requested, we found the vast majority of that information directly in BP's 2018 Sustainability Report. That report is incredibly detailed and wide-ranging, as it consists of 84 pages. The report covered all the other topics that we were looking for (strategy, funding approach, and spending). We mainly used this source because the information came directly from BP and thus was not described by a third party. We determined the company's sustainability strategy from the information in the report, which outlines the four main areas comprising that strategy. Some additional information about that strategy came directly from the CEO in his opening letter to the report, which we also included.