BP Target Neutral Assurance and Advisory Panel Public Statement

BP Target Neutral Assurance and Advisory Panel Public Statement March 2015

This statement represents the BP Target Neutral Advisory and Assurance Panel’s (AAP) views on the programme in its advisory capacity in relation to the period from January 2014 through December 2014.

Overview

BP Target Neutral (BPTN) remains a technically-impressive offsetting programme, and BP continues to make good progress developing certain aspects of its offer and sourcing high- quality offsetting projects. In 2014, BPTN exceeded its target retirements as a result of offsetting the FIFA World Cup and its Castrol Offer.

During the past year, BPTN notably broadened its brand visibility by offsetting journeys taken to major global events including FIFA World Cup Brazil 2014, Commonwealth Games Glasgow 2014, and the World Future Energy Summit. BPTN also developed a number of innovative offers including ‘B2B’ and ‘B2B2C’ products (enabling business customers and consumers to purchase a range of carbon neutral products, from autogas and lubricants, through to logistics).

BPTN has made good progress in working with BP businesses and by year end, had activities in development in all Downstream businesses including Fuels, Lubricants, Air BP and Petrochemicals. However, BPTN’s contribution to business value within BP remains tactical. There continues to be ongoing debate about the strategic value of BPTN as a sales tool versus BPTN as part of BP’s core values. The AAP have advised that the short term focus on BPTN as a sales tool will most likely gain greater internal traction and will help position the business as a key part of BP’s offering which will be especially critical as it undergoes evaluation during BP’s transformation process in the first half of 2015.

In addition, BPTN will need to make further progress on how to quantify the whole of reduce, replace, and neutralise programme to be able to assess the total carbon effect and not just the reductions achieved through offsets. This will help value TN’s broader contribution. Further, the AAP advise that BPTN also needs to look at the “beyond carbon” in part because there is the risk that offsetting will become a thing of the past. BPTN will therefore need to broaden its remit in 2015 to attract customers and other internal and external stakeholders. This will again help BPTN position itself as a central part of BP’s core strategic and sales offerings.

Finally, AAP would like to acknowledge the important work done by BPTN as an active member of the International Carbon Offset & Reduction Alliance (www.ICROA.org), in particular the research study undertaken with Imperial College London to quantify the social and economic benefits that carbon projects deliver beyond the carbon benefit.

Progress against the Panel’s Recommendations from Last Year In our previous Panel Statement, we urged BP to:

1) Develop the stories and indicators that illustrate the various ways that Target Neutral is an asset to BP, and use these to significantly improve staff awareness, engagement and uptake of Target Neutral BPTN has supported all BP’s major sponsorship activity in 2014 including BP’s sponsorship of the Glasgow Commonwealth Games, Castrol’s sponsorship of the FIFA World Cup Brazil, BP UAE’s sponsorship of the World Future Energy Summit and the internal BP Helios Awards.

In each case, BPTN ran a spectator carbon offsetting programme to raise awareness of the carbon impact of staging such events, encourage awareness of climate change and provide participants with practical tools to reduce and offset emissions. Reach through communications was in excess of ~300,000 people.

Specifically for the World Future Energy Summit in Abu Dhabi, BPTN has helped BP to strengthen and deepen conversations with Masdar.

BPTN developed a staff training programme together with the Eden Trust to give staff a deeper understanding of the challenges of climate change and consider innovative ways to respond. As commented earlier, a more strategic role of BPTN must be confirmed to deliver programmes like this more broadly across BP.

Finally, BPTN continue to communicate with its online community of ~40,000 through newsletter which have an open rate of ~50%, well above the average for similar industry communications.

2) Continue to develop creative B2B2C offers as a means to engage an ever greater number of end-consumers around the Reduce, Replace and Offset message

This was a key area of focus for BPTN during 2014 and is beginning to bear fruit through the partnership with Castrol and other BP businesses, confirming this is an area that is likely be particularly fruitful for BPTN in terms of engaging with consumers, as well as demonstrating the business value of sustainability propositions more generally. The product – Castrol Professional – is the world’s first range of carbon neutral lubricants and over 2014 and 2015 is being rolled out globally. The second launch was carbon neutral autogas in Germany, again a world first. The pilot was implemented towards the end of 2014 and we look forward to seeing how this initiative progresses in 2015.

3) Build BPTN as an international brand While the association with the FIFA World Cup and Commonwealth Games in 2014 helped BPTN build brand awareness, further work needs to be done to establish BPTN in the mind of its target audience - as a core part of the BP brand, as stand-alone offering with well-understood value and as part of the universe of sustainability-related business initiatives. An essential part of this will be to use existing BP branding and marketing channels as a platform for the BPTN brand. This is an issue that the Panel and BPTN team have discussed on many occasions in the past but as yet does not seem to have gained sufficient traction within the company; for example, TN is still not visible in BP consumer outlets, corporate marketing materials or sponsorship. AAP hopes that this is something that can be further addressed during 2015.

4) Demonstrate a strengthening of the strategic link between Target Neutral and BP Despite ongoing conversations, both internally and with the AAP, a number of factors – including the ongoing focus on the aftermath of Deepwater Horizon, problems arising from the sanctions against Russia and the departure of the previous Chief Executive of Downstream - have mitigated against this recommendation being fully taken forward. Nevertheless, the AAP continues to believe that this is an essential part of strengthening both BPTN and BP’s overall positioning and offering and will take the matter up again in 2015 with the new BP Downstream team once internal restructuring has been completed.

Recommendations for 2015

1. Focus on building B2B partnerships through BP’s businesses to encourage collaboration in carbon reduction

2. Develop and secure internal agreement on BPTN’s role in BP’s broader sales and marketing strategy 3. Develop and pilot tools for measuring the overall carbon impact of the reduce, replace and neutralise activities

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

SIGNED

Rita Clifton, Mark Kenber, Tim Smit

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.

------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.