BP Target Neutral Assurance and Advisory Panel Public Statement

BP Target Neutral Assurance and Advisory Panel Public Statement

BP Target Neutral Assurance and Advisory Panel Public Statement

April 2016

The BP Target Neutral (BPTN) Advisory and Assurance Panel (AAP) provides critical support tothe BPTN team and reviews the programme’s performance against its stated aims and generally accepted standards for environmental and social rigour. The statement outlines the Panel’s opinion on the programme for the period from January to December 2015.

Overview

2015 was notable for two major new agreements that should put climate change and energy at the top of the international agenda in the years to come. The Paris climate change agreement, signed in December, puts the world on a clear path towards carbon neutrality over the next half century, with decarbonisation of the global energy system likely to be at its heart. Meanwhile, the adoption of the UN Sustainable Development Goals also means that energy access and reducing the impact of human-induced climate change – in particular on the poorest communities – will be central to government policy-making. Both have significant implications for BP and BPTN, from the impact of policies on reducing carbon emissions to heightened expectations from investors that companies have clear low carbon business strategies and increased public demand for climate friendly alternatives. It is essential that these considerations shape BPTN’s work in 2016 and beyond; indeed BPTN has the potential to be a flag-bearer for renewed leadership on climate change by BP as a whole and the rest of this statement should be seen in this context.

In 2015, BP Target Neutral continued to make strong progress in the development of its offering and customer base, although the greenhouse gas emissions avoided showed a decline on the previous year.As it celebrates its 10th anniversary in 2016, BPTN can look back to a decade of constant development and learning which has led to the programme becoming an established part of BP’s customer engagement. The Panel was delighted that the programme emerged from BP’s internal reviews as a clear winner, demonstrating that taking a long-term strategy on the issue of climate change is paying dividends. With a team of six full-time staff, a cumulative offset of almost two million tons CO2 avoided and around ten million euros of business investment generated, BPTN is now well positioned to build on this to enhance its product offering and customer base in 2016.

The most exciting developments have occurred in the development of BPTN’s B-2-B opportunities, particularly with BP’s own businesses. 2015 saw the establishment of some strong collaborations, for example with Castrol, Air BP and Aral, that demonstrate clear business value. A pipeline of over 50 further projects is also under development.

The signing of the Paris Agreement has given new momentum to the climate agenda but, as the implementation of the agreement leads to new legislative measures, so BPTN will have to think about what role voluntary measures such as offsetting can continue to play. The Panel believes that demand will continue to grow from across the business community and that BPTN is well positioned to capture this but must ensure that the programme is forward-looking so that it is seen as fit for purpose and part of broader decarbonisation efforts, rather than simply a legacy from the past.

The Paris Agreement also puts a new focus on business action, corporate climate engagement and new market mechanisms. Initiatives such as the Oil and Gas Climate Initiative have opened up new opportunities for BP to re-engage on climate change. It will be crucial to position BPTN at the heart of these debates and highlight its huge potential as a tool for supporting climate action and risk management. Usingthe learning that has built up over the past years, this would allow BPTN to feed in with its experience and highlight the importance of its work.2016 must mark the beginning of a consolidated effort to communicate this message both internally and externally, in order to drive climate action and the growing market for Target Neutral. To that end, BPTN’s strategy should be closely aligned to the ongoing climate strategy development within BP.

The experience of the past years has indicated that there is room for strong growth of this programme and that BPTN needs to ensure that it possesses the relevant skills and capacities. The Panel is therefore delighted that, with the hiring of a carbon markets expert in 2015, BPTN has taken another crucial step in the development of its team.

BPTN has continued to run a rigorous selection process for the projects from which it sources carbon credits. The Panel is satisfied with the high standards that are being maintained andcongratulatesthe BPTN team and the Project Selection Committee on both the quality of the projects and its governance. The fact that one of the projects was rejected last year illustrates the rigour of theprocess and the added value of the on-site inspection visits that are regularly carried out.

2012 and 2014 were special years in which partnerships with theLondon Olympics, Brazil World Cup and Glasgow Commonwealth Games provided particularly high-profile opportunities to showcase BPTN and substantially increase the volume of CO2 reduced or offset. However, the Panel would have liked to see the momentum and interest generated during these events translated into higher emissions reductions in the following years. Whilst BPTN has again exceeded the target set for 2015 (520k t offset vs. 470 t expected), we believe that more ambition is possible and should be reflected in future targets.

The Panel acknowledges and commends the fact that BPTN has continued to maintain a strong industry visibility as the Chair of the International Carbon Offset & Reduction Alliance (ICROA), as well as though the partnership with the World Future Energy Summit. This will be important for maintaining sector leadership in the future.

Progressagainst the Panel’s Recommendations from Last Year

In our previous Panel Statement, we urged BP to:

  1. Focus on further building B2B partnerships with companies that have significant customer bases

As previously mentioned, The Panel has been encouraged by the development of some exciting collaborations with both other BP divisions and a number of importantexternal stakeholders. The Panel believesthis is the right approach for BPTN to take in 2016 and beyond and looks forward to seeing this accelerate in the coming months, with concrete new partnerships being put in place. In particular, with climate change coming in to sharper focus for companies in all sectors as a result of the Paris Agreement, new opportunities for BPTN should emerge and the Panel urges BPTN to understand these opportunities and be ready to take them.

  1. Develop and secure internal agreement on BPTN’s role in BP’s broader sales and marketing strategy

The Panel were delighted that during BP’s Strategy Review, Target Neutral was retained and recognized as an important programmesitting in the Downstream Commercial Development unit. However, although we see examples like Air BP and Castrol utilising Target Neutral as a key part of their marketing strategies, it is not clear that this approach is being considered more broadly across the spectrum of BP business. The successes so far provide a good rationale for BP’s Senior Leadership to support Target Neutral as part of a broader product and service offering. BP’s Executive management needs to be aware of BPTN’s value as a brand differentiatorand therefore maximise the use of the Target Neutral programmein the company’s general marketing and communications strategy. This is particularly important as there is increasing evidence that “green” brands are outperforming their peers in the broader marketplace.

  1. Develop and pilot tools for measuring the overall carbon impact of the reduce, replace and neutralise activities

Tools used include web-enabled carbon calculators for a broad customer base and special purpose calculators developed for Events and Fleet operations. Furthermore, BPTN has improved itscapacity to implement the PAS 2060 carbon neutrality standard for customers, including both carbon reduction and offsetting. Further development and deployment of these tools and others that enable BPTN and its partners confidently to calculate and communicate the emissions impact of the programme in the future should continue to be a priority area.

  1. Explore a wider environmental and social sustainability narrative in which both to wrap BPTN’s current remit and to strengthen the sales pitch

This has commenced, particularly with regards to the specific social and environmental benefits of the carbon reduction projects in the portfolio and associated communication materials.However, work remains to be done at the macro level, to create a much stronger positive socio-environmental message, for example by more clearly making BPTN a concrete expression and delivery mechanism for BP’s support for the Paris Agreement and Sustainable Development Goals. This could create a virtuous circle in which BPTN strengthens BP’s position as a sector leader on climate change, which in turn creates more interest in and drives more business toward the programme.

The Panel seesthe 10th Anniversary in 2016 as an opportunity to address some of these issues and a potential catapult for significant growth over the next decade. We would like to invite BPTN to fully explore this potential combined with a mid-term strategy aligned with a longer-term strategic goal.

Recommendations for next year

  1. Consolidate and continue to build B-2-B and B-2-C pipelines, incl. securing at least one tangible and communicable successful partnership that demonstrates that BPTN has enhanced the business performance of the partner
  2. Continue to build and communicate the business case for the reduce, replace and neutralize message
  3. Increase the internal engagement with BP so that BPTN becomes the sales and marketing partner for a greater range of projects, products and services
  4. Use the 10thanniversary as an opportunity to communicate BPTN’s USP and successes to date, and as a platform for launching an ambitious five year strategy, aligned with making BP the climate leader in its sector.

SIGNED

Rita Clifton, Mark Kenber, Tim Smit, Mike Barry (joined Nov 2015)

The members of the BP Target Neutral Assurance and Advisory Panel act in a personal capacity. The organisational affiliations below are listed for identification purposes only. Members have been invited to sit on the Panel in their individual capacity not as representatives of their respective organisations.

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THE REMIT OF THE PANEL

Our purpose is to provide independent advice and assurance to Target Neutral, including:

  • Advising and providing critical challenge on the strategic direction and on the operational running of the initiative.
  • Monitoring the initiative’s progress.
  • Providing proper overview and coordination of the educational elements of the initiative, notably around improving carbon literacy and stimulating behaviour change.
  • Providing a high-level assurance function to consider whether funds are appropriately distributed.
  • Reporting to stakeholders on the initiative’s policies, systems, processes and performance.