‘Very concerning’: BP dilutes net zero targets as global retreat from green

In early 2020, Bernard Looney had one clear goal as the incoming chief executive of BP: to convince the world to see the oil company differently. For a time, he did exactly that.

In a glossy, high-concept London campaign launch, the BP boss set out 10 new aims for the company, the most significant being BP’s transformation to 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.

At the time, his strategy even won the approval of Greenpeace – a feat few oil executives can boast. 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. His green plans have followed suit.

It emerged last week that BP plans to abandon its curbs on fossil fuel production in favour of targeting several new investments in the Middle East and the Gulf of Mexico.

The news angered climate campaigners, but surprised very few. BP’s green retreat has arguably been the most brazen in the industry – from a grandstanding green agenda to a fresh focus on fossil fuels – but the backtrack from environmental, social and governance (ESG) standards is gaining pace among the world’s biggest companies and investors.

The term ESG was first coined by the UN in a 2004 report entitled Who Cares Wins. It provided companies and investors with a model for implementing the ideals of responsible investing in their spending plans.

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 the commitments themselves – often to protect their profits.

BP’s oil industry rival Shell signalled earlier this year that it may slow the pace of its emissions reductions for this decade by setting a new plan to reduce the carbon intensity of the energy it sells by 15-20% by the end of the decade, compared with its previous target of 20%.

Shell has also backed away from a pledge to rapidly increase its use of “advanced recycling”, which involves breaking down plastic polymers into tiny molecules that can be made into synthetic fuels or new plastics. It promised to use 1m tonnes of this recycled plastic in its global petrochemicals plants, but later admitted the plan was “unfeasible”.

Oil companies are not alone in scaling down their green promises. Volkswagen has quietly dropped a voluntary target to cut CO2₂ emissions from passenger cars and light commercial vehicles by 30% between 2015 and 2025 in favour of making the same cuts between 2018 and 2030.

And Unilever – the conglomerate that owns brands including Hellmann’s mayonnaise and Vaseline, and which is widely credited with pioneering the ESG movement – signalled earlier this year that it would abandon or water down a string of ESG pledges amid a growing backlash from investors and politicians.

“It’s a very concerning trend,” said Lewis Johnston, director of policy at the responsible investment organisation ShareAction. “In general, we have seen quite a concerted and organised pushback against some of the principles of responsible investment. It’s a very different philosophy of what generates long-term value.”

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 favour 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.

Florida governor Ron DeSantis, legislators in Texas and other critics of ESG escalated the stakes in late 2022 by collectively pulling billions of dollars in state funds from BlackRock.

The investment group’s support for ESG measures has since plummeted. 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.