Oil giants promise green investment

Posted: 3 August 2006

BP has announced that it will spend $8 billion on 'alternative energy' over the next 10 years, while Shell said it will spend $1 billion on renewablel energy over the next 5 years. But says Friends of the Earth that is still only a fraction of what these oil giants plan to spend in the continuing search for oil and gas. But these comparisons could be misleading FOE says.

Shell and BP announce their financial results within two days of each other every quarter. Because financial reports are produced to common and mandatory reporting standards, investors and the media are able to compare the performance of the "two sisters" across a range of financial measures. However the lack of common reporting standards on environmental performance makes non-financial comparisons very difficult.

Friends of the Earth believes that the most important comparison to make on environmental issues is what proportion of each companies investments are being put into clear, green renewable energy rather than into finding yet more fossil fuel to burn, contributing to yet more dangerous climate change. The calculation also helps test how much each company's investments match their green claims and advertising.

Neither BP nor Shell provides enough information in their quarterly results to answer who is investing most (in proportionate terms) in the fuels of the future. Last year's full accounts (published earlier this year) provide the most up to date information to make the comparison.

Over the last year, BP has put massive effort into green branding with full page newspaper and regular TV adverts appearing almost every week suggesting that the company is well into the process of becoming "Beyond Petroleum". But the 2005 accounts indicate that the company is investing just $800m a year into its "Alternative Energy" division, representing just 5.7 per cent of its 2005 total capital investment of $14,149m. In comparison, 72 per cent of BP's new capital investment ($10,237m) in 2005 was spent looking for yet more oil and gas.

Green claims also tend to dominate Shell's corporate advertising again giving the impression that the company is well on the way to becoming clean and green. But its 2005 report indicate that Shell is investing an average of just $200m a year in renewables representing just 1.1 percent of its 2005 total capital investment of $17,436m. In contrast, 69 per cent ($12,046m) of Shell's new capital investment in 2005 was spent looking for yet more oil and gas.

These figures indicate that, for both companies investments in renewables represent a tiny proportion of their total investments and both companies have a very long way to go before their investments in green energy come close to reflecting the impression they are giving to customers of already being clean and green.

Friends of the Earth believes that the Government has a real opportunity to address these misleading claims and to enable a meaningful comparison between BP and Shell by strengthening its Companies Bill when it returns to the House of Commons in the autumn. At the moment, the Bill will require all quoted companies (i.e. the PLCs) to make an annual report on the impact of their business on people and the environmental. But the Bill does not provide any common standards or indicators for how companies should do this.

Friends of the Earth is calling on the Government to ensure the Companies Bill includes a common reporting standard and enables Key Performance Indicators to be put in place on a number of key issues, such as climate change and energy efficiency.

Craig Bennett, Head of Corporate Accountability Campaign at Friends of the Earth said:

"If the proportion of BP and Shell's investments in renewables came even close to the proportion of their advertising budget they spend bragging about them, the world would be a very different place and we would be well on the way to addressing dangerous climate change. But the reality is that both of these companies are making massive green claims while carrying on with unsustainable business as usual.

"Every quarter investors compare how well these two companies are doing on financial matters. But it is high time we had a robust way of comparing how they are doing with their environmental performance and, in particular, climate change. If the Government is even vaguely serious about addressing this most serious of issues, they should force all large companies to report to a common auditable standard on environmental matters. Then we might just be able to separate out green rhetoric from reality".

Source: FOE, July 27, 2006