BP’s Net Zero push has crashed into reality
I remember when I first encountered a hard copy FTSE 100 annual report. I was a first year undergraduate and my achingly left-wing lecturer in Business and Politics dropped copies in front of us in a seminar room, and asked us to rank the directors “on a fat cat scale.”
I can still recall the way he snarled at me when I innocently suggested that we could also consider shareholder returns. In addition to serving as props for disgruntled academics, annual reports serve a variety of purposes. For a long time they were mere regulatory requirements, mandated by law for public companies, built around financial statements and a directors’ report.
For all I know, my old professor is still sweating over rem-co reports to this day, but even he would have noticed that over time these publications took on another function, becoming an extension of marketing and stakeholder relations. They were padded out with warm examples of Corporate Social Responsibility before that morphed into ESG and the associated reporting requirements. Soon these documents were more about purpose than profit as they became a platform for a company to tell the story they wanted others to hear.
They can serve, therefore – in an admittedly niche field of study – as historical documents, revealing the attitudes of their time. This takes us to BP’s 2020 annual report, which was presented in the style of a child’s crayon drawing, complete with opening lines on the steps they were taking “in support of our purpose to reimagine energy for people and our planet, and our ambition to become a Net Zero company by 2050 or sooner and help the world get to Net Zero.”
Under then CEO Bernard Looney, BP promised to transform itself from an International Oil Company to an Integrated Energy Company, saying that “while this is a journey that will require patience, our goal is that BP over time will become a more valuable company for its shareholders and bring wider benefits for society.”
How’s that working out? Yesterday the company promised to “fundamentally reset” its strategy and improve its performance after profit crashed last year. With activist investor Elliot now firmly on the shareholder register, analysts expect a major announcement at BP’s capital markets day on 26 February. CEO Murray Auchincloss promises “a new direction for BP” – likely to be one that prioritises oil and gas over low-carbon energy.
Bold targets for green investment, unveiled just a few years ago, are likely to be jettisoned as the company follows the likes of Shell and Equinor in refocusing on fossil fuels. How times change.