BP Backs Away From Climate Goals In Quest To Maximize Profits

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In early 2020, Bernard Looney, then the CEO of BP, had one clear goal — to convince the world to see the oil company differently. For a time, he did exactly that, The Guardian reports. In a glossy London campaign launch, Looney set out 10 new aims for the company, the most significant one being the transformation of BP into a net zero energy company by 2050. Within months, he reinforced the rebranding with a pledge to cut the company’s oil and gas production by 40% from 2019 levels by the end of the decade.

The initiative won praise from Greenpeace, but by early 2023, BP had watered down the 40% cut to a 25% reduction after the war in Ukraine caused oil prices to surge, doubling the company’s profits. Within months, its greenest ever chief executive was ousted from the company amid revelations about undisclosed relationships with colleagues. That bit of extracurricular hanky-panky had a dramatic effect on the company’s climate initiative.

In September, the company announced plans to completely divest from a total of 10 offshore wind operations in the US that it currently owns through its subsidiary BP Wind Energy. At the same time, it detailed plans to acquire full ownership of Lightsource BP, a solar-focused joint venture in which it currently has a 50% stake. Some wind development projects would be transferred to the Lightsource BP portfolio.

Last week, BP announced plans to abandon its curbs on fossil fuel production in order to target several new investments in the Middle East and the Gulf of Mexico. According to Reuters, BP is currently in talks to invest in three new projects in Iraq, including one in the Majnoon field. The company holds a 50% stake in a joint venture operating the giant Rumaila oilfield in the south of the country, where it has been operating for a century. In August, BP signed an agreement with the Iraqi government to develop and explore the Kirkuk oilfield in the north of the country, which will also include building power plants and solar capacity. Unlike historic contracts which offered foreign companies razor thin margins, the new agreements are expected to include a more generous profit-sharing model, sources have told Reuters. It is also considering investing in the redevelopment of fields in Kuwait, the sources added.

In the Gulf of Mexico, BP has announced it will go ahead with the development of Kaskida, a large and complex reservoir, and the company also plans to green-light the development of the Tiber field. It will also consider the acquisition of assets in the prolific Permian shale basin to expand its existing US onshore business, which has expanded its reserves by over 2 billion barrels since acquiring the business in 2019, the sources said — as if the Permian Basin didn’t have enough problems already.

The news has angered climate campaigners, but surprised very few. BP’s green retreat has arguably been the most brazen in the industry, The Guardian says. It has gone from a grandstanding green agenda to a fresh focus on fossil fuels. But the backtracking from environmental, social, and governance standards is gaining pace among the world’s biggest companies and investors. Senior Greenpeace UK campaigner Philip Evans told The Guardian, “This is yet further proof that we cannot leave the future of our planet in the hands of fossil fuel bosses. It’s clear that BP CEO Murray Auchincloss is hell-bent on prioritizing company profits and shareholder wealth above all else as extreme floods and wildfires rack up billions of dollars in damages, destroying homes and lives all over the world. Oil companies cannot be trusted to curtail their further destruction of the planet.”

The End Of ESG

The term ESG was first coined by the UN in a 2004 report entitled Who Cares Wins, which provided companies and shareholders with a model for implementing the ideals of responsible investing. By 2015, the idea of ESG had evolved from being a talking point to a set of standards which could, and should, be measured. But in recent years, companies and investors in the US and Europe have begun to chafe at the requirements to disclose their ESG credentials and retreated from those commitments in order to protect their short term profits.

As recently as 2021, the world’s biggest investors counted ESG principles as important hallmarks of a sound investment. The US investment giants BlackRock and Vanguard voted in favor of almost half of all shareholder ESG resolutions proposed in 2021. But since then, they have dramatically withdrawn their support following a fierce political backlash.

The support for ESG measures by investor groups has plummeted since then. BlackRock has confirmed that in the 12 months to the end of June 2024, it supported only 20 of the 493 environmental and social proposals put forward by shareholders at the annual meetings of the firms in which it invests. This represents just 4% of ESG proposals, compared with 47% three years ago. Vanguard supported none of the 400 environmental or social shareholder proposals that it considered in the 2024 US proxy shareholder season, saying they were “overly prescriptive,” unnecessary, or did not relate to material financial risks.

“It’s a very concerning trend,” said Lewis Johnston, director of policy at the responsible investment organization ShareAction. “In general, we have seen quite a concerted and organized pushback against some of the principles of responsible investment. It’s a very different philosophy of what generates long-term value.” Gemma Woodward, the head of responsible investment at the UK wealth management firm Quilter Cheviot, highlighted the energy crisis triggered by Russia’s invasion of Ukraine as a tipping point in the trend against ESG. “We saw a real turn in the market where value came back into fashion, and so we saw an ‘easing of the pedal’ of the interest in [ESG],” she said. “I’m very worried, obviously, I guess the problem we’ve got is that we don’t have a global standard.”

However, BP and Shell still look “pretty good” compared with oil companies in the US, where there was an even bigger backlash against ESG, Woodward said. US banks JP Morgan and State Street pulled out of the Climate Action 100+ investor group, which pushes for change from big greenhouse gas emitters, this year. “It’s certainly at its most extreme in the US,” Johnston said. “But we’re not immune to it in the UK or in Europe.”

Last summer, the EU confirmed plans to water down the final rules for corporate ESG disclosures through the European Sustainability Reporting Standards. The move comes after European Commission’s president, Ursula von der Leyen, pledged to cut red tape across the EU executive’s work to counter complaints from big companies over the mounting cost of environmental rules. Under the new rules, companies will have more flexibility to decide what information is “material” and therefore should be reported, in effect making some disclosures voluntary instead of mandatory. The easing was described by HSBC analysts at the time as a “step back” in ambition and robustness, but a step that may facilitate convergence in sustainability reporting globally.

Johnston insisted that climate transition reporting should not be considered yet as another raft of burdensome reporting rules. Instead, he said, it was about making sure companies were aware of both the risks and the opportunities involved in adapting to the climate crisis. “Mandatory [climate] transition plans are a means of empowering companies and positioning the financial system as a whole, and aligning that and the real economy with the transition that we know is coming,” Johnston said. “So I think it’s absolutely wrong to look at this as merely another regulatory burden, because it really isn’t … It’s about imposing discipline and making sure that companies are preparing for what they should be doing, and that’s, again, responsible stewardship.”

It’s Just Business

Forbes has its own unique take on all this palaver about ESG and climate goals. Despite irrefutable proof that burning fossil fuels is causing massive  changes in the Earth’s environment, it tut-tuts, “Well, yes. Exactly so. After all, BP, ExxonMobil, Chevron, Shell and all the other major oil companies are exactly that — oil companies. They have always been oil companies, and the core competencies of their corporate cultures are, probably smartly, focused on maximizing profits from their oil-related core business.”

“The conceit of this government policy forced transition and the ESG mentality that drives it has to this point been that these oil companies would simply be able to somehow transform themselves into renewable energy companies in order to remain in business. Often lost in that discussion, though, is the fact that these are all corporations, and corporations exist for one reason — to maximize profits to be returned to their investors.

“It is important not to lose sight of the fact that, for management at these corporations, a focus on maximizing profits and returns to investors is not just a goal, but a fiduciary duty under the law. (Current BP CEO Murray) Auchincloss and his current management team at BP have determined that the best way to fulfill that duty is to increase focus on what has always been the company’s core business since its founding as British Petroleum in 1908. The only wonder here is that anyone would be surprised by any of this.”

The Takeaway

It would be hard to draw the line between the need for a sustainable climate and the need for shareholder profits any more clearly. The flippant attitude expressed by Forbes does nothing but illustrate the corruption of the economic system by corporate greed. A corporation is a legal fiction created by the consent of the body politic. As such, it has the same obligation to behave as a responsible member of society as any other person. If it fails to do so, the society that created it has every right to revoke its social license.

The priority of corporations over people is itself a fiction, one that traces its roots to the infamous Powell Memorandum written in 1971. One cannot help but be struck by the fact that this “profit úber alles” oil company is reaping the benefits of trillions of dollars and hundreds of thousands of lives lost in interminable wars fought in Iraq and Kuwait. How does its thirst for lucre square with the sacrifice made by so many military service members who died or were critically wounded in protecting its access to oil, oil, and more oil?

Can it be that corporations should make no contributions to the society that sustains them and bear no consequences for their concerted efforts to destroy the Earth for their own personal gain? Are they immune from any consequences for their actions, which many argue rise to the level of ecocide, simply because they have piece of paper that says they are a corporation? That seems to stretch common sense to the breaking point, but it is the prevailing wisdom today. Perhaps it is time to update our expectations for these rapacious organizations.