By Daniel Macmillen-Voskoboynik, Campaigns Officer, and Juliet Phillips, Campaigns Manager
BP is one of the world’s largest international oil and gas companies, with an annual revenue higher than the GDP of many countries. Its stated aim is to provide “light, heat and mobility” around the world, predominantly through the location, extraction, and trading of fossil fuels.
But BP’s business model, devoted to expanding its fossil fuel assets, has a major problem: the extraction and burning of fossil fuels is the largest contributor to global warming, which is contributing to climate disruption across the globe. BP has been responsible for 2.5% of all historical greenhouse gas emissions to date.
Excessive emissions are translating into extreme climatic circumstances for the world’s most vulnerable populations. This month droughts have led to severe crop failure in Southern India, triggering a wave of farmer suicides. Flash floods in Northern Bangladesh have cut a potential 700,000 tonnes from the country’s rice harvest. Donna, the strongest May cyclone in the southern hemisphere’s recorded history, brought torrential rains to Vanuatu and New Caledonia. This damage comes at a great social and economic cost.
Excessive emissions are translating into extreme climatic circumstances for the world’s most vulnerable populations and oil companies are increasingly trying to position themselves as part of the solution rather than the problem
In a context of growing public pressure, oil companies are increasingly trying to position themselves as part of the solution to climate change, rather than the problem. But until they shift their core business model, this aspiration remains untenable. While this change won’t happen overnight, there needs to be a shift from rhetoric to action. The stakes are incredibly high. Yet at the 2017 annual general meeting, the majority of BP’s shareholders delivered a resounding endorsement of “business as usual.”
— BP Middle East (@BP_MiddleEast) May 19, 2017
The presentations at the beginning of the meeting intended to present BP as a company with strong commitments to sustainability and safety. Executives repeatedly referenced a “low-carbon world”, and assured: “we will be part of the solution.” A glossy company video, displaying the breadth of BP’s operations pressed: “As scientists and engineers we recognise the urgency of climate change.” The sincerity of BP’s stated commitment to sustainability and safety were quickly tested as the questions came in thick and fast. The first half of the meeting was dominated by questions about BP’s links to human right violations, and the second to the company’s response to the low-carbon transition.
On climate change, Chairman Svanberg was “realistic” about the prospects of Paris, and keen to emphasise the responsibility of governments to take action. “Look at the Paris Agreement – it aims for 2C. All countries have to go back and decide what they want to do. But the pledges they made take us to 3.5C-4.5C. That’s the reality. We can’t change that reality. We are committing to Paris, we are committing to the targets of Paris. But current trends won’t get us to 2C… No one knows how 2C is going to happen.” But while current trends are not getting us to 2C, they are rapidly transforming the energy landscape.
Many shareholders were concerned about BP’s responsiveness to such gravitational shifts. Some asked about the threat posed by electric vehicles to BP’s business model. They compared BP’s own projections for the growth of electrified transport with industry peers and publications, which envision far faster levels of growth. The company was resistant to the vulnerability signalled by shareholders. BP believes that population and demand growth in emerging markets will provide healthy levels of appetite for its products in the coming decades. But developing countries are leading the energy transition. The Indian government has unveiled plans for the country’s entire car, scooter and motorcycle fleet to be electric by 2030. Using subsidies and legislative changes, China is encouraging the rapid growth of its electric vehicle market. When pushed, the chairman suggested that demand for oil could potentially peak in 2030.
— ShareAction (@ShareAction) May 17, 2017
The company’s affinity for natural gas is clear. Gas is a strategic priority for the company, justified in part by its “environmental benefits”. Dudley told the audience that if all coal-fired power plants were replaced with gas we would stay under 2C. But shareholders scrutinised the validity of gas as a “low-carbon fuel.” One shareholder flagged a study by the Stockholm Environment Institute which argued that gas needs strong guardrails and in order to be a “transitional fuel” gas can only be “lower-carbon” if it exhaustively eliminates methane leakages, and ensures that new gas infrastructure does not lock out the development of renewables. Dudley used the question to praise BP’s work on reducing methane leakage and gas flaring. While not addressing the risk of renewable lock-out, surprisingly, he noted his agreement with “everything the questioner said”, and committed to look back at the Stockholm Environment Institute report.
The pledges made by countries in the Paris Agreement take us to 3.5C-4.5C. That’s the reality. We can’t change that reality-
– CARL-HENRIC SVANBERG, CHAIRMAN, BP
BP was also pressed on its lobbying record, specifically its relationship to trade association Western States Petroleum Association (WSPA) which made headlines in 2015 for spreading false statements about California’s proposed limits on emissions. When asked how they could leverage their influence within WSPA to prevent the trade body from taking obstructive positions, BP suggested “this is a discussion from 2015” and refused to get drawn into the details. When later asked to publicly distance themselves from a report they’d financed which concluded that climate risk reporting could “distort the market”, BP declined.
— Platform (@PlatformLondon) May 17, 2017
Finally, long-standing AGM activist Rebecca Warren stood up to ask: “why was there no reference to climate change in BP’s human rights policy? After all, is climate change not fundamentally a human rights issue?” The Chairman replied: “you are connecting climate change to human rights. It’s a perspective. That’s the first time I hear that, and there’s logic there.” CEO Bob Dudley adds: “your perspective, which is judgmental, forgets that energy companies contribute to human development.”
— Daniel Voskoboynik (@bywordlight) May 17, 2017
The remark exposed a major blind spot. Climate change is the ultimate human rights issue, for it violates the foundational human right – the right to life.
The stage of the meeting was flanked by two large banners, visualising the seven new projects BP has unveiled over the last year. One of them is the new development of Zohr major gas field in Egypt. CEO Bob Dudley hailed the contribution made by Zohr to Egypt’s development, noting that Egyptian President el-Sisi had described it as a “national mega-project.” But President Abdel Fattah el-Sisi is no ordinary president – Human Rights Watch note that “[u]nder al-Sisi’s presidency, his security forces have arrested tens of thousands of Egyptians and committed flagrant rights abuses, including torture, enforced disappearances, and likely extrajudicial executions.” BP was asked whether the company had benefited from Sisi’s rule and his violent clampdown on protests. Previous BP projects in Egypt have been stalled or abandoned due to high levels of community resistance. The response was the company doesn’t make “political judgments” on governments they work with. Indeed, Dudley praised Egypt’s stability, noting that he was “comfortable with the level of risk in Egypt.”
Similar questions were raised around Azerbaijan, a key strategic area for BP. Recently the company has extended production-sharing arrangements in one of Azerbaijan’s top oil fields until 2049. Azerbaijan is ruled by a highly-repressive regime; dozens of journalists, human rights defenders and activists face politically motivated charges. In March 2017, Azerbaijan was suspended by the Extractive Industries Transparency Initiative, over the Azeri state’s failure to respond to civil rights and human rights concerns. When asked about the risks posed by this suspension to BP’s commitment to human rights, BP executives waved away any indications of responsibility. Dudley signalled his disagreement with the EITI’s decision. The chairman would later admit: “If governments find it okay…we will continue.”
Extractive projects bear long-lasting legacies on the local communities they work within. For decades, BP operated in the Colombian region of Casanare, at a time of deep civil conflict. In 2010, the company sold off its assets, leaving behind a region blighted by poverty and pollution. BP was asked to meet with local organisations to arrange a trust fund for local children, designed to increase access to education. But the company refused, saying: “We left Colombia eight years ago. I don’t think this is relevant for us.”
BP gets a roasting on human rights violations. Uninspiring answers from the board, refusing to meet Columbian representatives #BPAGM
— Juliet Phillips (@_JulietPhillips) May 17, 2017
The company was also challenged on its contribution to peace and justice in Casanare, where the firm is accused of providing security payments to Colombian state security forces. Such forces and their paramilitary allies, were linked to the assassination of thousands of unionists and community leaders. BP was asked whether it would disclose information around its payments and communications with state forces, to help contribute to truth around the civil conflict, and bring closure to bereaved families. But BP’s CEO waved away any commitment to disclosure, arguing that it was a buried and closed matter.
Concerns were raised around the expansion of Tangguh, BP’s LNG project in West Papua. Local communities have reported the project’s impact on the livelihoods of fisherman, and of receiving negligible or unequal benefits from revenue-sharing arrangements and trust funds. The CEO dismissed the suggestions, stating “we have transformed things for the good, unquestionably, in the area”. He reminded the questioner that BP was “always concerned” with the welfare of local communities. “But that does not guarantee that everyone is happy, that there will be different opinions.” The abundance of questions scrutinising the impact of BP’s projects certainly evidenced this diversity of opinions.
Accountability – or lack thereof
Three years ago, 99% of shareholders approved a resolution that mandated BP to provide further information about its approach to climate risk. Behind the gloss, what has really been achieved to shift the firm away from its unsustainable core business? The truth seems to be: little. The chairman made clear that BP sees us on course for 3.5 – 4.5C of warming, and the firm has no aspirations to set transition targets for a meaningfully low-carbon business model.
— ShareAction (@ShareActionUK) May 17, 2017
This year, ShareAction has highlighted to investors the binding vote on BP’s pay policy. We argued that since this policy will encourage and reward executives for implementing a high carbon strategy, investors should use their power to vote it down at the AGM. The vote on remuneration is ultimately a referendum on the company’s future strategy, and what executives are incentivised to do.
With investors coming under increasing pressure to divest their fossil fuel holdings, if they cannot justify the success of their engagements, it seems necessary to consider a bolder approach, which can ensure the safety of their assets, and the safety of the world at large.
This policy was rubberstamped with 97% support. The reality is that BP remains an oil company seeking to continue to profit from fossil fuels for decades to come, and that the majority of shareholders are quite happy with this. Only a few institutional investor voices were present at the meeting, asking the company to take further steps. This patient, incrementalist approach feels at odds with the magnitude of the challenge. With investors coming under increasing pressure to divest their fossil fuel holdings, if they cannot justify the success of their engagements, it seems necessary to consider a bolder approach, which can ensure the safety of their assets, and the safety of the world at large.
Thanks Daniel and Juliet! To find out more about our campaign on engaging high-carbon companies on transitition to 2 degrees, click here