Low-Carbon future assignment on BP low carbon future plans

Question

Task: How to investigate and versify the feasibility of BP’s Low-Carbon future assignment plans?

Answer

About BP
This Low-Carbon future assignmentwill examine petroleum company plans towards addressing a low carbon future. British Petroleum, BP Plc based in the United Kingdom works as an integrated company in the oil and gas sector. The oil and gas company was formed on 14th April 1909 by an individual, William Knox D'Arcy. It is headquartered in the United Kingdom in London. The company operates through three different segments Upstream, Downstream and also Rosneft. The Upstream segment of BP essentially focuses on the exploration and generation of oil and gas resources, development of oil fields, midstream-based transportation activities, carrying out storage and processing operations and also trading of natural and liquefied gas products. The Downstream functions of the company encompass the actions carried out by the refineries, and manufacturers, conducting storage, processing and marketing of crude oil and other types of petroleum resources and products to both wholesale and other retail consumers. Finally, the Rosneft segment of BP focuses on carrying out different types of investment functions to fulfil its strategic objectives. On this Low-Carbon future assignmentit is established that the total numbers of employees working in BP are around 65,900 (Forbes , 2022). BP contributes to the generation of heat, light and other types of mobility products for meeting the diversified needs of the people. The above functions are carried out with the motive of generating a reduced carbon-based future(BP , 2022).

BP’s Transition to a Low-Carbon Future
The Low-Carbon future assignmentfindings report the management of British Petroleum (BP) is focusing on transforming the firm to be a different kind of energy company by the close of 2030. BP’s management is thereby focusing on both diversifying and also decarbonising the firm. The company is focusing on reducing its production of oil and gas and also lowering the emissions levels and also enhancing its cash flow by upgrading the company’s existing portfolio and developing other bioenergy resources. Likewise, potential investments are focused on being rendered by BP’s management in developing reduced carbon-based energy fuels for scaling up its solar and wind energy projects. Newer opportunities are also being tracked by BP in capturing both carbon resources and hydrogen. BP’s management considerably focuses on generating around 40 per cent of the total investments for increasingly promoting its five transition-oriented business segments like bioenergy, EV Charging, renewable energy, hydrogen, and convenience by the close of 2025 (BP p.l.c., 2022).

BP’s Low-Carbon future assignmentstrategy essentially focuses on transforming itself from a global oil firm to an integrated energy-solution-based company that would contribute to rendering diversified energy solutions to its customers. The strategic focus of BP mainly rests along three different sectors: the generation of resilient hydrocarbons by lowering the emission levels, enhancing the portfolio and also in driving greater returns; double adjusting the EBITDA of the firm, sustaining the level of increased returns and focusing on meeting the diversified needs of the customers all associated to the convenience and mobility sector of the firm; generating low carbon-based energy fuels with an effective capital discipline and also a return-based focus. Further, BP’s management also focuses on effectively partnering with different nations, cities and other industries for helping the firm in generating integrated energy and mobility-based solutions while also working on reducing the level of carbon emissions and generating effective business opportunities. Innovation is also being effectively pursued by the firm by taking a resort to digital technologies for enhancing its operational efficiencies while also working in empowering the manpower resources for developing effective relationships with its customers spread over international territories. New businesses are being sought in being developed through the use of the BP Ventures platform and also by the use of its launchpad. The sustainability frame of British Petroleum essentially focuses on linking the strategy of the firm to its core purpose. TheLow-Carbon future assignment sustainability frame of BP essentially focuses on meeting its net zero ambitions by the close of 2050. BP’s management also focuses on providing greater access to the customers to potential energy sources, generating development on the well-being and health parameter of the customers while also supporting diversity and inclusion in the firm. The company focuses on promoting biodiversity, management of water resources, and generating nature-based energy solutions that help in reducing carbon-emission levels and in generating sustainable procurement activities. Stakeholder engagement is being pursued by BP’s management by developing commercial partnerships with diverse cities and urban corporations for meeting the decarbonisation goals and objectives; working on shared initiatives for the development of set standards and in achieving sustainability benchmarks; engaging potential investors; forming joint advocacy forums and also in the sharing of effective knowledge and learning between them(BP p.l.c., 2022).

As per the Low-Carbon future assignmentinvestigations, BP aims at being net zero by 2050. By 2030, the company aims at reducing emission levels by around 30 to 35 per cent. The carbon level emissions are also taken to be reduced by around 35 to 40 per cent by the close of 2030. Likewise, the carbon intensity levels of the products generated by the firm are focused on being reduced by 15 per cent by the end of 2030 (BP p.l.c., 2020).

Critical Analysis of BP’s Strategic Decisions
Economic Discontinuities in BP
The outbreak of the COVID-19 pandemic has resulted in generating an economic crisis for the oil and gas companies operating around the world. It has accounted for a reduction in the level of energy consumption by around 30 per cent. Likewise, the emergence of climate change on a large scale has made the production and marketing operations of oil and gas companies more prone to systematic risks. The management of the oil and gas firms had started taking stands for shifting to a reduced hydrocarbon-based future regarding the production and development of energy resources. A considerable amount of investments are being ploughed in the above direction to generate needed carbon resiliency. The investments are being generated for the development of potential resources that contribute to the generation of significant benefits associated with reduced break-even price structures and also in reducing the level of carbon emissions. Likewise, the focus is also being undertaken by the oil and gas companies on closing the operations of the non-productive wells that are highly carbon-intensive and other linked assets. The same is being pursued both in enhancing profitability and alsoin reducing the level of carbon emissions. The Low-Carbon future assignmentstrategic endeavours undertaken by the oil and gas firms for transitioning along to the reduced carbon-based energy resources are effectively observed mainly along three main segments resource specialists, integrated energy companies low-carbon based oil and gas players. The resource specialists are focusing on generating products with a low amount of hydrocarbons for around 30 to 50 years. Integrated energy firms are noted to be such firms that not only focus on retaining their profitable core but also on meeting the diversified needs of global consumers by producing low-carbon fuels, renewable energy sources, digitalised mobility solutions and capturing hydrogen. Finally, the low-carbon-based pure players are noted to be those firms that focus on the development of low-carbon-based platforms by potentially divesting from the high-carbon-based segments and portfolios. It is noted that potential oil and gas firms are interested in designing them as integrated energy companies. These players are strongly focusing on evolving an effective business mix, allocating financial resources and their internal capabilities while currently supporting their dividend streams and current market valuations that are generated based on the activities associated with the hydrocarbon segments(Beck et al., 2021).

British Petroleum (BP) in its new Low-Carbon future assignmentstrategy focuses on transforming itself into an ‘integrated energy company’ or IEC. The firm focuses on generating a considerable amount of investments for reducing the level of carbon emissions by the close of 2030. The investments are taken to increase by around 8 folds by the close of 2025. BP’s management also focuses on developing partnerships with around 15 different cities and three core industrial networks for meeting its decarbonisation objectives and enhancing the level of customer interactions by 20 million on a per-day basis till the end of 2030. The company management of BP also focuses on driving business and operational efficiency to gain growth in terms of ROACE. Value is focused on being generated from Resilient Hydrocarbon-oriented business by declining production by around 40 per cent through management of portfolios and also in ceasing exploration activities carried out in foreign nations. The net-zero objectives of the firm are targeted through lowering the emission levels by 35 per cent by the end of 2030. Likewise, the carbon-based emission levels are also being focused on being reduced by 40 per cent along with lowering the level of carbon intensity in the different products by around 15 per cent by the close of 2030. BP’s management also aims in rendering long-term value generation for its shareholder communities by committing to generate share buybacks amounting to around 60 per cent of excess cash. The Low-Carbon future assignmentfindings also show the company is also committed to generating annual growth of around 9 per cent regards to EBITDA by the close of 2025. Sustainable value is also focused on being generated for the shareholders through continually investing large amounts in both low carbon and also non-oil projects. The investments focused on being rendered by BP in the low-carbon energy sector have increased from $500 million to a figure of $5 billion annually. Its capacity in generating renewable energy sources has risen from around 2.5GW in 2019 to around 50GW currently. The production of bioenergy has also greatly increased from 22,000 barrels on a per-day basis to a figure greater than around 100,000 barrels daily. The hydrogen business of the firm has gained growth by around 10 per cent in the core markets while the charging points for electric vehicles have enhanced from 7,500 to around 70,000(BP p.l.c., 2020).

With regards to resilient hydrocarbons, BP’s management reflected the beginning of 11 different major projects from the inception of 2020. The demand for reduced carbon-based fuels around the world accounts to act as a major opportunity for BP to gain leverage linked to both its portfolio of products and an effective customer base. The company focuses on the development of large quantities of bioenergy in the form of biofuels and biogas. Offshore wind projects are also being designed by BP with the development of a pipeline that contributes to the generation of 5.2GW of electricity. For hydrogen, the market capacity estimated by BP amounts to 1.3 million tonnes annually. Hydrocarbon value chains are also created by the company in the United Kingdom while the North Sea territory is designed for pursuing retailing, trading and supply chain functions. Value chains are also targeted for hydrogen and electron projects and to also gain new markets for such(BP , 2022).

Low-Carbon future assignment- BP Stakeholder Expectations
The Low-Carbon future assignmentstakeholder theory is an aspect of capitalism that focuses on understanding the level of interconnectedness between a business organisation and its people, both internal and external. The manpower base of the company thus encompasses employees, customers, suppliers, investors, social communities and also the government at large. All the people sets identified above tend to bear a stake in the activities and functions of the business institution. The stakeholder theory thus focuses on generating value for the stakeholders and not just shareholders for the firm (Stakeholder Theory, 2018).

Differences in the levels of expectations between a principal and agent amount to a conflict between the two parties. The conflict arises in that the agents may not tend to act in the interest of the principal. The degree of miscommunication and also disagreement between the two parties results in various organisational problems resulting in inefficiencies and also financial losses. The companies thereby are required not to ignore the understanding of the expectations of their manpower resources while making strategic decisions. The non-ignorance of the human factor by the firms contributes to enhancing the quality of strategic decisions pursued by the organisation and thus enhances the building up of a collaborative work culture aiming at greater productivity and profitability for the firm. Balanced scorecards are also incorporated by the companies for countering the level of distortions that amount to the growth of the principal-agent relationship problem. The use of financial incentives linked with performance also serves the goal (Lovallo & Sibony, 2006).

The decision-making activities pursued by BP’s management for transitioning to a low-carbon future are pursued by engaging potential stakeholders like employees, investors, customers, suppliers, government bodies and also the members involved in the greater society. Stakeholder engagement activities pursued by BP are further detailed as under: Employees Pulse surveys and also Pulse Live Surveys are carried out by BP for gathering relevant feedback from its employees. The Low-Carbon future assignmentsurveys also reflect on the perceptions of the employees regarding the operational changes and demands countered by them and also their perceptions regarding the leadership support gained by them for resolving such. Employee engagement scores gained from the conducting of the surveys act as key performance indicators for BP. In cases, where the live surveys carried out by BP reflect a considerable amount of employee anxiety the company management had prior designed different webcasts wherein the CEO of BP directly converses with the employees for resolving their queries and issues. Likewise, the CEO also discusses the new strategy with the employees for transitioning to the low-carbon energy sector. Investors For the investors, the company focuses on engaging them to discuss the new strategic focus, financial frame and also about investor proposition. A new distribution policy is also being designed by the company by entering into effective dialogue with the potential shareholders. Likewise, investor engagement is also pursued by BP’s management for discussing the environmental, social and also governance factors commonly known as the ESG factors. The ESG discussions are carried out in a one-to-one manner while also participating in different external events and conducting group meetings concerning climate change are also pursued by the company.

Customers
Collaboration is pursued by BP’s management with Original Equipment Manufacturers or OEMs like Ford, Renault, Volvo and others for a discussion of future transportation technologies. The tracking of the global customer base is also pursued by the firm.

Government and Regulatory Bodies
The company management takes focuses on publicising the company tax report annually. The company also advocated carbon pricing schemes for the US markets on a regional basis. Inputs to the EU Methane strategy are also provided by the firm.

Suppliers and Partner Firms
Individual sessions concerning the net zero policy associated with people and the planet were pursued in terms of designing workshops for suppliers. Likewise, University Collaborations concerning the Carbon Mitigation Initiative CMI were also pursued by the company in direct collaboration with Princeton University.

Greater Society
The biodiversity position framed by British Petroleum for helping in restoring, sustaining and also enhancing nature is pursued in effective collaboration with global bodies like UNESCO among others. New measures are discussed in such meetings for fulfilling the end goals. Likewise, strategies and activities are effectively designed by BP for both supporting and acting on meeting the human rights policies and functions. Consultations are carried out with NGOs, investors and other human rights experts for developing effective policies and also to duly update them(BP , 2020).

Conclusion
The critical analysis carried out in the paper reflects that BP has gained success in transitioning to a low-carbon future. The company has successfully developed and diversified its non-renewable energy production base by developing offshore projects catering to wind energy needs. In addition to the production of sustainable energy resources the company also undertakes effective projects for addressing the objectives of its net zero target by 2050. The Low-Carbon future assignmentresults show a significant amount of investments are being rendered by BP’s management for the generation of low carbon emissions from its transportation and other operational aspects. Likewise, large numbers of charging stations are being continually developed by the company for encouraging the use of electronic vehicles or EVs. The management of BP potentially focuses on carrying out effective stakeholder engagement in terms of involving different sets of stakeholders like employees, customers, investors, suppliers and partners, government and regulatory bodies and the society at large. Different types of stakeholder engagement activities are pursued by the company concerning the different stakeholders to reduce the emergence of chances of potential conflicts. Likewise, the CEO of BP also carries on an effective discussion with the employees for understanding their perceptions and issues while also discussing novel ideas with them. The same tends to empower them to act in a committed manner in bringing about change has been observed on this Low-Carbon future assignment.

References
Beck, C. et al., 2021. The big choices for oil and gas in navigating the energy transition. United States : McKinsey and Company.Low-Carbon future assignment

BP , 2020. How we engage with our stakeholders. London : BP.
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BP p.l.c., 2020. From International Oil Company to Integrated Energy Company: bp sets out strategy for decade of delivery towards net zero ambition. [Online] Available at: https://www.bp.com/en/global/corporate/news-and-insights/press-releases/from-international-oil-company-to-integrated-energy-company-bp-sets-out-strategy-for-decade-of-delivery-towards-net-zero-ambition.html [Accessed 25 August 2022].

BP p.l.c., 2022. Our transformation. [Online] Available at: https://www.bp.com/en/global/corporate/who-we-are/our-transformation.html.
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Lovallo, D.P. & Sibony, O., 2006. Distortions and Deceptions in Strategic Decisions. Paris: McKinsey.
Stakeholder Theory, 2018. About the Stakeholder Theory. Low-Carbon future assignment[Online] Available at: http://stakeholdertheory.org/about/ [Accessed 25 August 2022].