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How green is bp { December 8 2002 } Original Source Link: (May no longer be active)
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December 8, 2002
How Green Is BP?
By Darcy Frey
Last March, Lord John Browne, the group chief executive of the British oil giant BP, gave a speech at Stanford University. Had you stumbled into the auditorium partway through, you might be forgiven for assuming the man at the podium was not an oil baron, an industrialist, an extractor of fossil fuels from the tender earth but an environmentalist of the high church calling for the abolition of hydrocarbons, the very substance that had made his company and himself so fabulously rich. His subject was global climate change -- in particular, the process by which humans, by burning oil and gas, have been slowly, perhaps irreversibly, warming the earth's atmosphere. And instead of hewing to the line of industry, instead of calling (as President Bush and the head of Exxon Mobil have) for caution and further research, he said, ''I believe the American people expect a company like BP . . . to offer answers and not excuses.'' He also said, ''Climate change is an issue which raises fundamental questions about the relationship between companies and society as a whole, and between one generation and the next.'' He even said, ''Companies composed of highly skilled and trained people can't live in denial of mounting evidence gathered by hundreds of the most reputable scientists in the world.''
Around the time Browne was at Stanford, sounding strikingly unlike an oil executive, BP was trying its own kind of identity shift, sounding strikingly unlike an oil company. Two years earlier, at a cost of $200 million, it began an enormous corporate rebranding exercise, shortening its name from British Petroleum to BP, coining the slogan ''Beyond Petroleum'' and redesigning its corporate insignia. Out went the old British Petroleum shield that had been a familiar image in Britain for more than 70 years, and in came a green, yellow and white sunburst that seemed to suggest a warm and fuzzy feeling about the earth. BP press officers were careful not to explain exactly what ''Beyond Petroleum'' meant, but the slogan, coupled with the cheerful sunburst, sent the message that the company was looking past oil and gas toward a benign, eco-friendly future of solar and renewable energy. New Yorkers in particular were the target of a high-saturation ad campaign that felt, at times, like an overfriendly stranger putting his arm around you in a bar. In Times Square, a huge billboard went up, reading if only we could harness the energy of new york city. Then the stranger, perhaps feeling the need to explain his intentions, went on: solar, natural gas, wind, hydrogen. and oh yes, oil. Finally, the stranger took his arm away with a bit of a shrug: it's a start.
BP's print and TV ad campaign, which is winding down this month, represents one of the most dazzlingly high-profile corporate P.R. efforts in recent years. Created by Ogilvy & Mather Worldwide, it aspires to a conversational, almost confidential voice that suggests, You know what oil companies do to the environment, and we do, too, but honestly, we're not like that at all. ''People are skeptical of oil companies -- go figure!'' says Jennifer Ruys, director of external affairs for BP. ''And the ad campaign was designed to get at that skepticism.'' As the billboards announce: BP was ''the first oil company to publicly recognize the risks of global climate change.'' BP ''believes in alternative energy. Like solar and cappuccino.'' BP has joined forces with New York's Urban Park Rangers to, of all things, release four bald eagles into the wilds of Upper Manhattan. At the end of each ad was the same winking tag line: ''It's a start.''
Based in London, BP is the world's second-largest oil company (after Exxon Mobil), with gross revenues of $174 billion and 15,500 service stations in the United States. It operates in more than 100 countries and produces almost 3.5 billion barrels of oil and gas a year. Largely, this has been the handiwork of Lord Browne, who became group chief executive in 1995 (and was knighted 3 years later) and followed his own ascension by quickly expanding the once midsize company into a huge multinational. In 1999, BP merged with Amoco in a deal worth $140 billion; a year later, it bought Atlantic Richfield for $27 billion. These megadeals have more than paid for themselves. At press time, BP shares were trading at $38, which is an 80 percent increase since Browne's rise to power seven years ago.
If Browne, 54, has made a name for himself as a high-stakes deal maker, he has also shown that he is alert to the dangers of heading a colossal oil company in a world that -- because of climate change, murmurings of war-for-oil and a host of other global crises -- may hate oil companies, no matter how profitable they are. More than that, he has shown the ambition to redefine the very nature of Big Oil: pushing BP to confront global warming, candidly acknowledge the company's mistakes (environmental penalties against the company appear on its Web site), enter into dialogue with environmental groups, hire people with strong environmental ethics and opinions. ''John Browne would be the first to say, 'Even on our best day, we're still a big dirty company,''' says one person involved in BP's rebranding effort. ''But aren't there ways to do it smarter, cleaner, in a more surprising and forward-thinking way?''' He adds, ''This guy's swimming upstream.''
BP's multimillion-dollar campaign is the public face of Browne's convictions. At a time when anxiety over dependence on Middle Eastern oil has sent other energy companies scurrying for cover, BP is rushing to center stage, betting that, as Michael Kaye, who worked on the campaign as an associate creative director at Ogilvy, puts it, ''BP can be a friend -- listening to consumers, speaking in a human voice.'' BP is also betting that this will gain them a competitive advantage in the marketplace, that it will convince consumers that BP is, in the words of Anna Catalano, group vice president for marketing, ''the company that goes beyond what you expect from an oil company -- frank, open, honest and unapologetic.'' BP is the only oil company right now risking a huge advertising presence in this oil-wary culture. And this may turn out to be the richest deal of all.
But to persuade the public that BP is no rapacious multinational, that it is instead an organization thinking first and foremost of the public good, may not come so easily as long as BP remains an oil company, deriving the vast majority of its profits from the black stuff that -- from drilling rig to oil tanker to refinery to gas station -- scars the earth, pollutes the air and eventually warms the planet. And once the company tried to convey its new identity in billboard form, the contradiction only deepened. How can an oil company be ''Beyond Petroleum'' without actively distancing itself from its core product, and how can a company that digs big holes in the ground possibly advertise itself as a sensitive steward of the environment? BP's rebranding campaign caused fits, not only in the environmental movement, which saw it as the highest form of hypocrisy, but also within the company itself, which embraced and then disavowed its P.R. message so many times that people began to wonder if the company was beyond petroleum or merely beyond belief. The Independent of London, a vigilant BP-watcher, concluded that the company was ''brimming with success, gushing with money, and very much wanting to be liked. Yet its image is confused, and its reputation is on the line as never before.''
But its biggest challenge may come years, perhaps decades, from now, when the world turns to other forms of energy -- in part because of dwindling oil supplies but mainly because of the mounting and unimpeachable evidence that we have a profound carbon problem on our hands; that even if we discover billions of new barrels of oil in the ground, we cannot keep burning them -- and pumping vast amounts of carbon dioxide and other so-called greenhouse gases into the atmosphere -- without potentially catastrophic consequences. According to the latest findings of the United Nations Intergovernmental Panel on Climate Change, in order to stabilize greenhouse gases in the atmosphere, global emissions must be reduced to at least 60 percent below 1990 levels. That is a radical change in the way the world uses energy. And to accomplish that, many people feel, will require nothing less than a new industrial revolution, an overwhelming retreat from society's mass reliance on the carbon fuels -- oil, gas and coal -- that have powered the global economy for more than a hundred years.
Browne is uncomfortable speculating about a future completely without oil. ''My view is that hydrocarbons will be the bulk of the energy supply for the next 30 to 50 years,'' he said when I met him last spring. But clearly Browne is trying to prepare BP for the end of the fossil-fuel game -- by cutting the emissions of carbon dioxide that it creates while producing oil and gas, by shifting to cleaner fuels like natural gas, which emits about half the volume of CO2 generated from coal and ultimately by positioning itself as a producer of alternative and renewable energy: hydrogen, wind, solar.
But whether the company -- which made its fortunes in the oil fields of Iran and later on the North Slope of Alaska -- can survive the shift to a new energy economy remains an open question. ''That's a huge level of wishful thinking,'' says one American scientist who has advised BP's senior management on climate change and renewable energy. ''Of course they say they see themselves that way, and of course they're going to try. But whether they will have any chance of successfully outcompeting newcomers in renewable energy is a very big question. Because historically, once those transformations have happened, the existing companies have not held the edge. These companies, some of which have existed for a hundred years, are essentially about extracting petroleum. And in a world where you don't extract petroleum anymore, the first order of expectation is that you're dead.''
The Dalton highway is a two-lane gravel road that runs some 400 miles from Fairbanks, Alaska, to the coast of the Arctic Ocean. Built by BP with a consortium of other oil companies after the huge 1968 strike at Prudhoe Bay, it has been open to the public for more than 10 years. After the highway, known as the Haul Road, descends the north slope of the Brooks Range, it begins to cross the open, boggy tundra of the Arctic coastal plain. Gradually, as the landscape grows prairie flat, natural objects lose their dominance and industrial ones take their place: pipelines, pump stations, piles of gravel. By the time you reach Prudhoe Bay, industry has completely consumed the view: wellheads, compressor stations, seawater processing plants, roads, flares, landing strips and overhead power lines stretch as far as the eye can see. Here, some 200 miles north of the Arctic Circle, in the middle of a vast boreal wilderness, is one of the largest industrial developments in the world.
Browne had overseen the company's Alaska division for many years, and when he became group chief executive in 1995, he revealed himself to be one oil man who did not believe that the oil business could -- or should -- go on as it had before. Soft-spoken and slightly built, with a manner more befitting a university lecture hall than an offshore oil rig, Browne consulted with dozens of scientists and took what he describes as a ''deep dive'' into the confusing, sometimes contradictory science of global warming. Back then, BP (along with Exxon Mobil, Royal Dutch/Shell and a few other oil companies) was still a member of the Global Climate Coalition, an international lobbying group set up specifically to cast skepticism on climate-change science and, later, to undermine support for the Kyoto Protocol, the international pact in which industrialized nations agreed to reduce their greenhouse gas emissions. But in 1997, Browne gave a speech at Stanford (a precursor to the one last spring) in which he acknowledged that there was now an ''effective consensus'' among the world's leading scientists regarding the human influence on the climate. ''The science wasn't complete -- but science is never complete,'' he said last spring. ''But they knew enough to say that there were long-term risks and that precautionary action was necessary if we were to avoid the greater risk -- of the evidence mounting to the point where draconian action was unavoidable.''
In the continuing, ever-changing study of global warming, five years is an ice age, so it is hard to remember exactly how revolutionary this was, coming from the C.E.O. of a major oil company in 1997. But at the time, the American Petroleum Institute, of which BP had been a longstanding member, announced that Browne had, as he recalls, ''left the church.''
''BP was the first to say that climate change was a problem, the first to take responsibility and the first to have an internal target'' for reducing their emissions, says Eileen Claussen, the president of the Pew Center on Global Climate Change. ''They were pretty brave.''
In some respects, it was an act of corporate bravery for BP and, later, Royal Dutch/Shell and a handful of other companies, to buck their own industry. Unlike the tobacco companies, which for years denied that their products were causing harm -- or Exxon Mobil, which ran ads trying to discredit global-warming science -- BP and the others have been willing to confront the unpleasant truth that not only their business practices but also their core products are probable causes of global warming. In 1996, BP resigned from the Global Climate Coalition, then offered its support of the Kyoto Protocol and joined Claussen's Business Environmental Leadership Council, a program set up by the Pew Center to encourage private-sector involvement. In 1998, Browne publicly committed BP to cutting its carbon-dioxide emissions by 10 percent below 1990 levels by the year 2010, which was a 40 percent cut from business as usual and a target far more ambitious than the Kyoto Protocol itself.
But it is not just altruism that has convinced Browne and these other C.E.O.'s to seize the moral high ground. Despite the Bush administration's stubborn refusal to deal with the issue, Browne says that he thinks there will soon be government regulation of greenhouse gases. And companies that have anticipated regulation will not only know how to use it to their advantage; they will also, as Browne puts it, ''gain a seat at the table, a chance to influence future rules.''
And so, in order to meet its target for reducing its greenhouse-gas emissions, BP sought the advice of NGO's like the Pew Center and Environmental Defense and set up a system in which each of its 150 business units, spread across more than 100 countries, would be assigned a quota of emissions permits and encouraged to trade with one another. The company gave each business unit the choice of bringing itself into compliance by cutting its own emissions, buying emissions credits from other units or making enough greenhouse-gas reductions to have leftover permits that could be sold to other business units that violate their emissions ceilings. The motivation was simple enough: business units that reduced their emissions or cut their fuel consumption would have those savings count toward their bottom line, which, in turn, would be reflected in pay scales and bonuses at year's end.
Many environmentalists are skeptical of such market-based solutions to global warming. For one thing, with such a vast number of different emissions sources and no single method for measuring emissions, enforcing compliance becomes hard, tempting companies to fudge the numbers. Then there's the matter of mitigation: why should polluters be allowed to trade emissions instead of being forced to solve the problem at its root? And will trading programs merely slow the growth rate of emissions when society's goal should be to engineer a fundamental shift away from fossil fuels?
But emissions trading, which is part of the compliance mechanism of the Kyoto Protocol, is supported by the vast majority of economists, who believe that market-based mechanisms may be the most cost-effective -- and therefore most viable -- method of cutting greenhouse gases. And though it doesn't shift the energy basis of the economy, it does cut down on carbon emissions in absolute terms. When Browne stood up at Stanford this past spring, he was there to report hard numbers: BP had not just met its target -- to reduce its emissions of greenhouse gases by 10 percent below 1990 levels -- it had exceeded it, done so eight years ahead of schedule and with no net economic cost. In fact, because of energy efficiency measures, the emissions reductions amounted to a net gain of $600 million. ''And we are not,'' he told me later, ''an inefficient company.''
BP's achievement complicates matters for Bush, who has pronounced the Kyoto Protocol ''fatally flawed'' because regulating carbon-dioxide emissions ''does not make economic sense for America.''
That line of argument does not persuade Browne. ''If you say to people, 'Do you want to develop the world and have a good living standard, or do you want a safer environment?' people are terrified by the choice,'' Browne said to me last spring. ''That is a failure of leadership.'' Speaking of leadership, I asked, what did he think about Bush's position on the issue -- that caps on emissions would be too costly for American businesses? Browne paused, then answered, careful not to mention any names in particular: ''Well, it's unfair to the world to say that none of this is possible when it is.''
Last summer, bp celebrated the 25th anniversary of the Trans-Alaska Pipeline. The company put on a big barbecue; speeches were given. But those celebrations were overshadowed by the fact that BP's North Slope production, which peaked at two million barrels a day in the mid-1980's, has dwindled to less than a million today. As production has declined, BP -- already the largest operator on the slope, with roughly 30 percent of the state's oil-extraction industry -- has lobbied to open the Arctic National Wildlife Refuge to the east and built the first offshore oil projects in the Arctic Ocean to the north. BP's mantra is to make ''zero environmental impact'' and to leave only a ''small industrial footprint.'' And by most accounts, it does wield its ground-eviscerating equipment with great care. But the bottom line is that BP's stock price -- and its obligations to shareholders -- hinges on locating more oil fields. And any new field, subjected to the drill bit, is a potential insult to the earth.
In the fall of 2000, Browne made it clear that if the Arctic refuge -- an iconic 19-million-acre tract of land in northeast Alaska that is home to polar bears and grizzlies, wolves, musk oxen and a 125,000-strong herd of caribou -- was opened up under a Republican administration, BP would be interested in exploring there. After all, the United States Geological Survey estimates that the refuge contains anywhere from 3 billion to 16 billion barrels of recoverable oil. Again on Feb. 13, 2001, three weeks after Bush took office, Browne acknowledged that BP openly supported efforts to drill.
BP's stated intentions for the refuge happened to coincide with its ''Beyond Petroleum'' campaign, and environmentalists had a field day pointing out the inconsistencies. Greenpeace announced that until BP started seriously investing in renewables, a more fitting corporate logo would be, in the words of one spokeswoman, ''a miserable polar bear on an icecap shrinking because of global warming.'' John Browne himself was honored by Greenpeace for giving the ''Best Impression of an Environmentalist.'' And referring to the company's interest in the Arctic refuge, The Independent wrote that it was ''strange that a company boss with prominent green pretensions should advocate -- openly -- what many people would see as the industrial rape of an unspoiled wilderness.''
The protests over BP's position on the Arctic refuge could not have come at a worse time. Just a few months earlier, the company's new advertising campaign was met in some corners with howls of derision and even demonstrations outside its London offices. Stung by the controversy, the company tried to pull several TV spots, and where that time was locked in by contract, BP lost ''several million dollars,'' according to two people involved in the ad campaign. In cases where ads could not be pulled, the company removed the words ''Beyond Petroleum.'' ''It's funny,'' says one of them, ''I never doubted that they were the most progressive oil company around, but they didn't think through what it would require from a P.R. point of view. By pulling the ads, they showed weakness rather than having the courage of their convictions, which is what the whole rebranding effort was all about.''
Later, when the time came to prepare for the campaign's second phase, BP once again waffled over whether to use the phrase ''Beyond Petroleum.'' ''I was in so many meetings when the answer was no, yes, no, yes,'' says one member of the ad team. And the company's concern over how its P.R. message was being perceived delayed the campaign for more than a year.
Eventually, the company once again embraced the phrase ''Beyond Petroleum.'' But according to one member of the ad team, BP, fearful of exaggerating its claims and opening itself to further criticism, worried the ad copy to death. ''All the definitive points they were making in the ads got slightly watered down,'' the ad-team member says. Finally, the company decided to use the tag line ''It's a start'' -- which can sound frank and refreshing or, depending on your point of view, hedging and defensive.
Meanwhile, the issue of whether or not to drill in the Arctic refuge, at a time when BP's Alaska oil reserves are dwindling, still has the company tied up in knots. On the one hand, Browne no longer openly advocates drilling in the refuge, as he did in 2000 and 2001. On the other hand, when asked after his Stanford speech last spring what the company's position was, he disappointed environmentalists by refusing to rule out drilling altogether, saying, ''I believe we should have no part in that debate.''
A BP consultant on environmental policy says of Browne, ''The impression he wants to leave is that it's all a process -- first Congress has to vote for drilling, then the company needs to assess its value, etc., but that even if it's opened, the company probably won't drill.'' But others who work with the company have privately heard just the opposite. ''One of their vice presidents told me flat out,'' another consultant says, '' 'If it's opened, we'll drill.'''
BP's position on the refuge is ''evolving,'' according to Ronald Chappell, who was head of press relations for BP Alaska and who now works in its London headquarters. In the early to mid-90's, BP was engaged in lobbying to open the refuge. ''But,'' Chappell says, ''I think that the company has sort of decided that the role of corporations in public life is one of standing back and letting governments make decisions, trying to inform public policy but not making political contributions.''
But, in fact, the company did make political contributions -- $560,000 through its employee political action committee in 2000, according to a BP spokeswoman. Moreover, at the time that Chappell and I spoke, the company was a member and contributor to Arctic Power, a prodevelopment lobbying group whose Internet site highlights ''top 10 reasons to support development in A.N.W.R.,'' and had a representative on the Arctic Power board. When I pointed this out to Chappell, he demurred, then sought me out a few minutes later, when I happened to be standing with Eileen Claussen of the Pew Center, one of John Browne's closest environmental advisers. ''I misspoke,'' Chappell said to us. ''It's true, we give to Arctic Power. We gave $50,000 last year but none so far this year. We also give to the American Petroleum Institute.''
Claussen, looking at him, said what others - including many within the company -- think but will not say out loud: ''Shame on you.'' (Last month, BP withdrew from the group.)
The arctic national Wildlife Refuge, which will once again be vulnerable to industry assault under the new Republican Congressional majority, is just one place BP may be interested in doing business. In recent years, it has also built Northstar, an artificial drilling island in the waters off Prudhoe Bay and the first offshore oil-exploration site in the Arctic Ocean, the oil flowing to the mainland through a six-mile undersea pipeline. And the company owns a 2.2 percent stake in PetroChina, the state-owned firm that is building a controversial pipeline across Tibet. These projects, as well as its interest in the refuge, have all been the subject of shareholder resolutions seeking to force BP to divest, to bring its actions in line with its rhetoric. And the resolutions (and BP's sometimes strong-arm legal tactics to quell them) all point out how difficult it is for an oil company to grow its business without also harming the environment. After violating federal clean-air laws at eight refineries across the country, BP, in January 2001, paid a $10 million penalty and agreed to spend $500 million modernizing its pollution-control technology. After delaying to report that its contractor had illegally dumped hazardous waste in northern Alaska, the company, in 1999, was fined $7 million in civil and criminal penalties.
It may seem unfair that BP is the target of environmental and social-responsibility movements. Shouldn't Greenpeace et al. be going after Exxon Mobil, which still tries to sow public skepticism toward global warming theories and has reportedly worked behind the scenes to remove a prominent scientist from the United Nations climate change panel and still refuses to pay $5 billion in punitive damages ordered by an Alaska court after the 1989 Valdez oil spill? But BP has, by virtue of its slogans and its actions, tried to seize the moral high ground and so is judged by a different standard.
Browne seems to understand this, and at Stanford last spring he outlined his next set of goals, ambitious by any standard: to reduce global-warming gases from BP's own operations as well as from the products it makes, to maintain CO2 emissions at current levels even as the company doubles its production of oil and gas, to make 50 percent of the company's pump sales worldwide come from clean fuels. Anticipating the future, BP bought Solarex in 1999 for $45 million, making it one of the largest solar companies in the world. It is also participating in fuel-cell technology research efforts with auto and engine manufacturers. And it is testing the viability of other energy sources like wind and hydrogen.
Few question the idea that BP is now the most conscientious oil company around, or that Browne is deeply committed to cleaning up BP's act. One of Browne's closest colleagues suggests that he may go into the climate-change field after he retires from the oil business. Meanwhile, its competitors, according to a Royal Dutch/Shell executive, feel pressed by BP into taking ever-greener positions -- even Exxon Mobil has recently given a grant to Stanford University to study global warming. But while Browne and BP may show greater sensitivity to environmental concerns than any other company in its industry, it may also be impossible for any company that derives well over 90 percent of its revenue from fossil fuels to claim to be part of the solution. Despite its new sunburst logo and ''Beyond Petroleum'' slogan, BP still invests $12 billion, or 25 times more, on oil and gas than on its wind and solar division for the simple fact that, right now, there's a huge market for oil and almost none for solar panels. And that's not just BP's problem; that's ours. Ronald Chappell, the BP spokesman, says as much when he points out that all those environmentalists flying into the Arctic National Wildlife Refuge to save the planet are using up a lot of airplane fuel to do it. ''That,'' he says, ''is the devil's bargain we all have made.''
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