Update May, 2010:
BP's Deep Horizon Blowout demonstrates that the company culture reported on in this paper has drowned in deeply polluted water. BP's own employees are reporting pre-blow out decisions made on a least cost rather than lowest risk basis, decisions leading to the deadly explosion of the oil platform. This disaster is already at the scale of the Exxon Valdez oil spill, with oil and toxic dispersants soaking Gulf wetlands, killing birds and marine life, and threatening the livelihood of tens of thousands of fisherman, processors, and tourist industry employees. Perhaps BP and the rest of the petro-industry can learn from the "golden era" described here.
                                                                                                            --Ernest Lowe.

Context for BP’s break with the industry
Insurance industry set the precedent
BP's action plan
BP Solar
Commentary on missed opportunities in  BP's action plan from an industrial ecology perspective
Business Models—Values, Money and Saving the Planet
Notes
Update and links

(BP's site, www.bp.com has a large number of references to climate change and global warming but without a focused access to them. A search on these terms will give you access to speeches, social and environmental reports dealing with the issues.)

The authors

Ernest Lowe is one of the pioneers in applying industrial ecology to business and community strategic planning. He is co-author of Discovering Industrial Ecology  (Battelle Press) and the Eco-Industrial Parks Handbook.

Dr. Robert J.  Harris is president and founder of Paradigm Research International, in Reston, Virginia He specializes in creating new business models that help organizations achieve sustainable growth. Harris has advised public and private companies, non-profit organizations and government agencies in the areas of health, energy, environment, chemicals, real estate, transportation, national security, telecommunications and computer technology. He received his doctorate in physics at the College of William and Mary.

 Executive Summary:

 In this article CES explores  the implications of British Petroleum’s decision to accept the emerging consensus on global climate change and acknowledge its contributions to greenhouse gas emissions. BP has formed an action agenda for reducing emissions internally and for working in partnership with other organizations around the world to reduce human impact on climate. We focus on why BP made this decision, how BP arrived at the decision, and its implications for BP itself, for its competitors, and for other multinational corporations.

Introduction

British Petroleum appears to be fundamentally changing the way it does business.  In a groundbreaking speech by CEO John Browne in May, 1997, (1)  British Petroleum announced to the world its decision to accept that climate change is occurring and its intention to do something about reducing BP's contributions to it.   This action has attracted attention from President Clinton, BP's competitors, environmentalists, and the business press; it also has the potential to raise, considerably,  public expectations regarding the actions of other multinational companies.

Browne’s speech was a breakthrough for four reasons.

• BP was the first multinational corporation other than re-insurance companies to join the emerging consensus on climate change.
• BP committed to reduce greenhouse emissions from all of its own business operations.
• The company proposed  to join international efforts to reduce greenhouse emissions, and
• Solar energy was officially “moved up to the big table”, as president of BP Solar Peter Beadle explains— on par with BP’s three other lines of business—exploration, oil, and chemicals.

Is BP reacting to inevitable environmental pressures, but conducting business as usual, or is BP seizing the moment and using global climate change as a doorway to a new business model for the 21st century?  In conducting the research for this article, the authors interviewed BP personnel, representatives from other oil companies and from environmental organizations. (please see Acknowledgments at end.)  What follows explores how and why BP decided to act on climate change and, from this experience, we distill learnings that other companies can use to inform their environmental strategy.
 

John Browne rose to the leadership of British Petroleum through BP Exploration, where he led that division's restructuring in the early 90s. At 48, when BP decided to break with the rest of the industry on climate change, he was the youngest chief executive among the top oil companies. John Sawhill, the Nature Conservancy President who has known Browne for 20 years, says, "He does not like to run with the pack. Browne sees BP's position on climate change as a way to distinguish them from others in their industry. BP tries to understand long-term forces at work."

The Context for BP’s Break with the Industry

On May 19, 1997 John Browne, British Petroleum's Group Chief Executive, broke with the oil industry's position on greenhouse gas emissions and global climate change with these words.

"There's a lot of noise in the data. It is hard to isolate cause and effect. But there is now an effective consensus among the world's leading scientists and serious and well informed people outside the scientific community that there is a discernible human influence on the climate, and a link between the concentration of carbon dioxide and the increase in temperature. The time to consider the policy dimensions of climate change is not when the link between greenhouse gases and climate change is conclusively proven but when the possibility cannot be discounted and is taken seriously by the society of which we are part. We in BP have reached that point."

In this speech at Stanford University Browne acknowledged BP's role in contributing to greenhouse gases and announced a strategy for reducing such emissions across the worldwide operations of the company.

In late September BP's chief executive built upon this strategy in a second address in Berlin. Here he proposed more detailed policy options including energy taxes, carbon emissions trading, and joint implementation. Browne emphasized the need for different countries to develop the mix of greenhouse gas reduction strategies appropriate for each. He re-emphasized the proactive position he had announced at Stanford:

"I've been struck since I first spoke on this subject . . . by the degree of support there is within our company for a constructive approach—an approach which doesn't start with a denial of the problem, but rather with a determination to treat this as another challenge which we can help to resolve."

These talks came at critical moments: beginning six months prior to the Kyoto U.N. Framework Convention on Climate Change, and at a time when many U.S. corporations sought to discourage the Clinton Administration from "going too far" in agreeing to limitations on emissions at this meeting.

There were significant precedents to BP's action. Beginning in the early 90s, scientists of the environmental action organization, Greenpeace, argued that global climate change was triggering more frequent hurricanes and floods and record claims on insurance companies.  By 1995, insurance executives attended the Berlin Climate conference and began considering the merits of this argument. (2) Frank Nutter, President of the Reinsurance Association of America pointed out that in the U.S., twenty-one out of the twenty-five largest catastrophes (in terms of insurance claims paid) had occurred between 1985 and 1995. Of these, sixteen involved wind and water, mainly in the form of hurricanes. (3)  Richard Keeling, a former Lloyds of London executive at the 1995 Berlin meeting said,

"Every major economy in the world where we have significant exposure has had a loss . . . we started getting concerned about this problem, and we got our experts to look at the reasons for these losses. They turned around and said 'well, we can't prove that we have a definite global warming problem, but by the time we can, you chaps are in real trouble." (4)

Five major European insurance companies have begun an effort to take their customers' environmental performance into account when setting premiums and to improve their own environmental record:   Senior executives of UNI Storebrand (Norway), Swiss Re, Gerling Global Konzern (Germany), General Accident (UK), and National Provident Institution (UK) pledged to integrate environmental considerations and a 'precautionary principle' into their business goals. These and other financial companies collaborated with Leggett in writing a book on climate change in 1996. (2 & 5)

By late 1996 Leggett had left Greenpeace to launch Solar Century, a non-profit organization devoted to increasing investments in photovoltaic energy sources. The Chairman of the Gerling Group reinsurance company is on this organization's board and has formed Gaia Kapital, a venture capital fund, to invest in solar. Swiss Re has invested in one of Solar Century's first projects.

Public concern and the leadership of these European re-insurance companies has helped European leaders to set tighter greenhouse gas limits for their countries and to urge prompt U.S. action on its emissions. However, major U.S. corporations have worked to counter the threat of U.S. commitments to emissions reductions. The Global Climate Coalition (GCC) has been an important channel for their communication to the public and to Washington. Gail McDonald, president of the Global Climate Coalition, says:

" . . . there are those who would rush the United States into an international climate agreement that could have devastating impacts on our economy. It's no wonder that more than fifty United States Senators have co-sponsored the "Sense of the Senate" resolution introduced  . . . by Senator Robert Byrd, D-WV, and Senator Chuck Hagel, R-NE, calling on President Clinton to refrain from signing any international climate agreement that does not apply to all nations of the world equally. The proposals currently under consideration by the United Nations do not."  (6)

This "Sense of the Senate" resolution was passed unanimously. Environmentalists have criticized the business-led demand for equal application of the climate agreement to developing and developed nations as a resourceful strategy to kill any agreement because developing countries leaders generally insist that they need softer limits in order to build their economies. They also argue that industrialized countries are responsible for a disproportionate share of greenhouse gas generation. BP withdrew from the Global Climate Coalition in 1996 and began to form the contrarian position announced in the May 19th speech by Browne.

One last important piece of the context for BP's decision is the Economists' Statement on Climate Change,   a consensus document circulated in January 1997 and signed by over 2,600 members of the American Economics Association, including eight Nobel laureates. It states,

"As economists, we believe that global climate change carries with it significant environmental, economic, social, and geopolitical risks, and that preventive steps are justified. Economic studies have found that there are many potential policies to reduce greenhouse-gas emissions for which the total benefits outweigh the total costs. For the United States in particular, sound economic analysis shows that there are policy options that would slow climate change without harming American living standards, and these measures may in fact improve U.S. productivity in the longer run." (7)

Setting the Stage for BP’s Change

The key turning point in the formulation of BP’s position on climate change and the writing of   Browne's speech was when BP withdrew from the GCC and decided to take stock of itself and the world.  However, the foundation was laid for this year and a half decision process during the recession of 1992:

"We suffered a down turn like many companies in ’92," said one executive, "and it became a crisis for us.  Our ’92 financials were dramatically bad and that triggered a sea change in how BP viewed its operations.  We took a lot of steps to refocus and  became a much flatter organization. Browne, was crucial in this change.  " (8)

One of the outcomes of this change at BP was a greater emphasis on partnering and strategic alliances.  BP became organized around small business units that were free to get what they needed from the best sources. This decentralization led to differing views on how best to do any particular task which led to "out of the box" thinking, a phrase used by all BP representatives interviewed for this article. This new approach to BP’s business was born out of crisis but four years of practice set the stage for how BP would address climate change.

One unique partnership which supported development of BP's climate change position was embodied in a series of four environmental forums in the U.S. and Europe. These closed, off-the-record meetings, gathered feedback from environmental NGOs, and from experts on health, safety, and environment on BP's environmental performance and targets for improvement BP was represented by top executives in these meetings that included, "Not just our friends but even Greenpeace." (9). Peter Beadle says the forum provides the company with a repoprt card and they do act on forum recommendations John Sawhill chairs the meetings in the U.S. as a private citizen, not in his capacity as President of Nature Conservancy.
 

Timeline of events leading up to Browne’s speech  1993 Health, Safety and Environment Report includes balanced discussion of climate change issues.  1st quarter, 1996: European pressure on climate issues drove company to assess BP's greenhouse gas emissions and their sources.  2nd quarter, 1996: Managing Directors (executive members of the board of directors) devoted 3.5 hours to Climate Change with Dr. Henry Jacoby, a leading climate expert from MIT.  Late 1996: Managing Directors decided to formulate a “Where BP Stands” statement.  Early 1997: Draft statement was “road tested” internally, with NGOs, and governments.  1st quarter, 1997: Began drafting Browne’s speech based on the Where BP Stands statement and discovered BP was embarking on a journey whose exact destination was unknown.  May 19, 1997: Stanford speech by Browne "Make sure actions are stronger than the words."  September 30, 1997: Browne speaks in Berlin, detailing policy options and including energy taxes as one acceptable option. (10)

BP's Action Plan for Implementing it's Decision

BP pledges to seek solutions to the climate change challenge in four areas:

CONSERVATION. "We will seek continuous improvement in our own use of energy, and a better understanding of our CO2 emissions and how they can be controlled, including opportunities for CO2 sequestration. Additionally, we will encourage our customers, suppliers and partners to conserve energy."

• Monitor and control CO2  emissions of BP operations. Set performance targets. Develop industry consensus on measurement protocols.
• Increase energy efficiency of production processes.
• Apply advanced technology to produce less waste and demand less energy.
• Eliminate flaring and venting of feed and product gases, including volatile organic compounds.
• In the U.S., BP is a member of the EPA and DOE ClimateWise program. It  is also active in the international Energy Users Group taskforce on energy efficiency.

• BP is investing to increase solar photovoltaic manufacturing capacity with a goal of tripling sales over the next decade to one billion dollars.
• BP was the first corporate sponsor of a three year international public/private collaboration to develop a global energy technology strategy.

• BP is a partner in a Nature Conservancy program to conserve 1.5 million hectares (over 3 million acres) of Bolivian rainforest.
• Browne called for policy enabling multinational companies to reduce greenhouse gas emissions in the countries where the reduction is greatest while the marginal cost is lowest.
• Design of new BP facilities in developing countries incorporates cleanest available technology.

• BP has partnered with the Environmental Defense Fund to understand emissions trading, policy options, and other international structures.
• Acceptance of energy taxes so long as they are designed to actually reduce greenhouse gas emissions and cover all industrial sectors and fuels.

Discussion of BP's Climate Change Action Agenda

Research on Energy Technologies

BP was the first corporate sponsor of an ambitious research initiative to define a Global Energy Strategy to Address Climate Change. Battelle Northwest Laboratories has organized this effort that includes The Beijing Energy Research Institute, the U.S. Electric Power Research Institute, and ten other national and international research organizations. (11)

This three year program will "develop a technical strategy to expedite the development and diffusion of low-cost, low carbon emission technologies."  The steps include assessment of current energy technology R&D trends and regional energy needs; projection of scenarios for the transition from carbon to non-carbon-based fuels; and definition of a policy and investment strategy for reducing emissions in the most cost-effective way.

While participation in this research will guide long-term strategic planning by BP, the company is increasing its near-term commitment to one particular technology, solar photovoltaic.

BP Solar

Browne has set a goal of tripling revenues from this business to a billion dollars in the next decade (a total larger than the present world market for PVs). Current plans call for adding annual capacity for manufacturing PVs yielding fifty megawatts by the end of the century. In his Stanford speech he announced that a new plant in Fairfield, California would be in production by years end, with an initial annual output of seven megawatts, growing to fifteen mgw.

For context, in 1996 the total world production of PVs was at ninety mgw. On the other hand a typical new fossil fuel plant produces 500 to 1000 megawatts of energy. Although one can not do a straight comparison of outputs from these sources, it is clear that the transition between them would require a massive investment in solar production capacity. This is one of the reasons participation in the Battelle-led technology strategy effort is important: to guide decisions on the timing of investments in alternative technologies.

Richard Sowter, former President of BP Solar America, said systems integration is a key source of competitive advantage for its solar products. BP delivers solar modules with thin film PVs, converters, and all components packaged in a ready to install system. He sees utility de-regulation and consumer incentives included in the Million Roof Solar Initiative announced by President Clinton (a part of the U.S. greenhouse gas reduction strategy) as important drivers for growth in demand and improvement in cost-competitiveness.

Joint Implementation—fostering international partnerships

Browne broadly defines this as "doing the most effective things in the places where they have the greatest impact." In his Berlin speech he called for policy instruments that give corporations the flexibility needed to select the countries where they focus their emission reductions. This freedom enables them to act "where the marginal cost of such curbs is lowest, but where their marginal effect is greatest." He also suggests incentives for more rapid turnover of capital stock in order to retire outmoded and more polluting equipment.

Another example of BP's joint implementation is its partnership with the Nature Conservancy and American Electric Power to preserve rain forest in Bolivia. (The forest's absorption of CO2 offsets a portion of the releases from the company's operations and products.) BP intends to use this project to learn how to most effectively create such international partnerships. Some forest preservation programs to create offsets for CO2 emissions have resulted in simply moving deforestation to another area or have led to other unexpected consequences. The project will also seek to develop means of verifying emissions savings. "We want to get questions like this answered before getting involved in a large way that may actually be damaging."

BP's action agenda and overall proactive stance on climate change goes far beyond any major corporation except for the European re-insurance companies. It demonstrates a long-term strategic awareness that competitive advantage comes from proactively creating policy rather than attempting to slow the course of change.

But What About BP's Customers? Scenario Planing to Address Long-term Interests

However, there is another potential major business opportunity for BP. This is developing action steps to address the really critical source of greenhouse gases: BP's customers who burn its oil and gasoline products. The emissions from most forms of transportation and, in a much lesser way, from  oil-burning power plants, far outweigh those directly generated by the company's operations. (BP estimates that transportation alone contributes twenty percent of greenhouse gases. In the U.S. the figure is closer to 30%.)

There are actions that an oil and chemical company committed to sustainability may take to impact its customers' greenhouse gas emissions.  A few of the choices include:

• Forming partnerships with power and transportation vehicle companies to significantly increase the energy efficiency of their facilities and equipment.
• Investing in development of alternative technologies for profoundly increased fuel efficiency. (Such as the Rocky Mountain Institute hypercar or the Rosen Motors version of hybrid-electric vehicles.)
• Supporting development of integrated, inter-modal transportation systems, especially in developing countries. Use this integrated view of transportation to guide marketing strategy.
• Using  its landholdings as a base for solar generation of electricity.
• Using its global network of gas stations for customer education/awareness and service for maintaining high efficiency and low pollution. Install BP photovoltaics for powering BP stations and for recharging electric car batteries. (Browne announced the first PVs at BP stations in his Berlin speech.)

BP's increased commitment to solar energy is one indication that it is already considering paths that could reconcile the tension between threatening its own future by serving long-term interests, and asking  ‘what identity will best serve that long term interest.’ Peter Beadle, President of BP Solar America, said, "With his climate change speech, John Browne allows solar to be brought to the main table of BP. Previously there were just three businesses: oil, exploration, and chemicals. Now there are four. Solar will be developed to become one of the main products of our company. "

BP's solar strategy is a major step in its transition, however, Browne assumes that oil and gas will remain primary energy sources for decades. Both oil and coal-based energy companies could be faced with new realities that challenge such an assumption. One or more of the following scenarios could emerge long before their resource base is exhausted.

1. Alternative automobiles and buses with dramatically higher fuel efficiency and/or alternative fuels could be developed by entrepreneurs and brought to market much sooner than leading manufacturers now believe possible. Fuel cell technology or the Rocky Mountain Institute Hypercar design are two of the  possible breakthroughs here.

2. Energy deregulation and privatization could open the door for similar technical/entrepreneurial innovations in the power industry. Renewable sources could become cost competitive with fossil sources sooner than now expected through systems integration, ending of subsidies for fossil fuels, and competitive forces replacing the monopoly status of utilities. On the other hand, deregulation may simply encourage fossil fuel use because coal in particular remains the lowest cost source.

3. Technical, environmental, and business breakthroughs in the petro-chemical and biotechnology industries could significantly increase the quantity and value of downstream products. This could support a shift to a strong conservation-based approach to resources in oil companies.

4. Non-linear effects in climate change  could accelerate warming trends globally and/or regionally generating disastrous impacts on food production. This would be likely to lead to much stronger action to control emissions and phase out use of fossil fuels. (13)

5. The present increased concern for climate change by insurance and banking companies could become a consensus position that the risks of continued increases in greenhouse gases outweigh the economic risks of cutting them significantly. This position could be expressed through a combination of pressure on public policy, incentives and/or penalties to industry, and through direct investment in new technologies.

Are these completely unlikely scenarios? Perhaps, but a  scenario for home computing that would have been very unlikely in 1978 has been realized during the next twenty years. The Internet and World Wide Web have revolutionized the way society works and lives through personal computing and communications. This globally networked explosion of  information/communication capability is itself becoming the foundation for entrepreneurs in energy and transportation to develop products and gain competitive advantage with surprising speed, even on British Petroleum's turf.

From our interviews it appears that BP seeks to be so prepared. We asked Ken Blower, BP America's Director of Environment, Health and Safety, if the now primarily petroleum-based company could adapt to technological breakthroughs reducing demand for their oil products, e.g. fuel cells as an energy source for transportation. According to Blower,  "If that's the world we're facing, we'll adapt to it and do a good job of serving our customers. Our business is providing mobility. We want to catch the growing market where it occurs. If its fuel cells, that's of interest to us. If we look at it that way, it empowers us."

Business Models—Values, Money and Saving the Planet (12)

Will a company seriously threaten its own future on behalf of the planet?  A quick reading of Browne’s speech implies as much. Carbon emissions are generally thought to be the primary source of global warming. Surely BP’s stance of accepting the global warming trend, a view currently out of step with other oil major companies, will eventually cost it in reduced revenues and profits.  How can BP succeed as a growing profitable company by taking the side of the planet?  After all, BP is a business, and the business of business is making money, right?

The answer, of course, is “yes” to the last question, but the more complete answer depends on how a company makes its money, and on what business model it uses.  While many specific business models exist for each industry, the core issue of how a company chooses to do business is ultimately the question of whether it believes that VALUE CREATES MONEY or whether it believes that MONEY CREATES VALUE as the primary driving force of business. We call business models from the first class of models Value-Based Models or VBM’s, and ones from the second class are called a Money
Based Model, or MBM’s.

Our position is that Money-Based Model’s are Clockwork Business Models of the industrial age which are not sustainable, and that Value-Based Models’s are sustainable but have not become widely used yet.  The simple reasons for these conclusions are that  MBM’s are all about optimization which “uses up” or consumes what is, while VBM’s are all about innovation or creating what does not yet exist. MBM's operate like closed systems and VBM's operate like open systems.

We see examples of VBM’s in the information technology marketplace like Netscape who gave away 40 million copies of its only product at the start of its business a few years ago.  This is creativity driving value driving money, but Netscape had relatively little to lose.  BP is a different story.  BP has billions of dollars in retained earnings to lose and they are in an industrial-age industry where it is hard to create instant world value as an opening decision.  …unless they go completely outside the box and seize leadership in addressing the very global problem that is so closely tied to  products from their industry.

John Browne has done what complexity scientist, Stuart Kauffman, calls “penetrating the adjacent possible” Browne and the BP staff have stepped out of what exists in the world of oil company behavior (one competitor referred to BP’s decision this way:  “Browne is talking out of church”)  and crossed the conceptual boundary of what did not yet exist to grab an idea and bring it to life back into current reality. The idea is called, “let’s take the lead on this global warming problem”. This process is called innovation and it is what nature does all the time.  This step by BP enlarged the possibilities for the planet and, at the same time, enlarged the possibilities for BP’s business.

It was a value-based business decision, but why do it now?

Understanding Environmental Leadership

In all of our interviews, Browne was characterized as an independent person who did not follow the crowd and who chose the timing of his decisions based on a clear look at the present from a position situated far into the future.  We heard this from BP employees, NGO colleagues, and competitors.  Ed Winterholt of BP Exploration put it this way, “John Browne is not reactive to anybody; he anticipates and then acts according to his own time table."  A competitor offered this backhanded compliment: “Browne is very clever at giving up concessions in the present in order to win valuable gains in the future.”

It appears that BP is in the process of figuring out what its business will be in the 21st century and is making this decision by networking and partnering with all parts of the value chain associated with its oil products.

BP’s new direction is a big step in transitioning the company to a values-based business model, though  only time and events will say how far BP’s journey will take the company.  A new corporate trend began in 1990 when the insurance industry responded to business survival issues thought to be caused by the force of global warming. This force next took aim at the oil industry as potentially next in line to be hit with industry survival issues, as they faced questions of  responsibility for climate change.  An environmental issue opened the door for Browne’s speech this year and with it, BP has effectively acknowledged that the future of the planet and that of BP (and other companies, by implication) are co-mingled. The well-being of one affects that of the other.  In this sense, BP is certainly not threatening its future to save the planet but rather changing its relationship with the planet. The question is, what kind of relationship will BP forge with the planet?

Implications of BP’s Decision for CEO’s and Environmental Managers

The import of BP's actions are being studied by corporations and other stakeholders throughout the world. During a recent interview, John Sawhill, the president of the Nature Conservancy, said, “a lot of people are reading Browne’s speech in board rooms…he has heard from a lot of companies…the speech is being read in a very positive sense.”  But more important than the decision announced in Browne’s May 19th speech, are his actions since then that will create pressure on other companies to do their part. In a September 1997 speech given by Browne in Berlin, he announced that beginning in 1998, BP will begin to voluntarily measure and seek ways to limit the greenhouse gases it pumps into the air.  Browne said,

“For too long this been an issue on which few were prepared to accept responsibility.  The oil industry has the ability and the responsibility both to contribute to the debate…and to take a leadership position by showing that we, ourselves, can make a constructive contribution to the solution.”
The Environmental Defense Fund called BP’s action an “historic acceptance of responsibility for the overriding environmental problem of our time.”  The executive director of the EDF, Fred Krupp, said it “puts real pressure on the other oil companies to act like responsible adults, and I think it puts substantial pressure on the Clinton White House to advance a meaningful reduction target.”

The  impact on other CEO’s and Environmental Managers to match Browne’s ante inside their own companies for controlling the green house emissions will be tough enough.  But Browne’s action agenda goes further to impact society outside the oil industry.  Browne called for stronger economic incentives to encourage companies to play more important roles in protecting the environment.  He said that incentives such as taxes on energy or the use of licenses for harmful materials could force firms to reduce environmentally harmful products. These suggestions and more were part of a statement introduced by Browne called Climate Change Principles. These principles include
 
 

BP's Climate Change Principles (10 out of 22)  International Agreements: The framework should allow space for differing national circumstances and should give equitable weight to the developing world's particular interests.  Binding Commitments: Any legally binding commitment on emission levels should include a package of flexible international mechanisms to enable efficient implementation. Adequate time should be provided to allow for effective turnover of capital stock.  Targets and Timetables: Nations should earnestly pursue specific targets and timetables but recognize that finding solutions is a lengthy journey, with success defined by numerous decisions taken over a series of international conferences.  Monitoring and Reporting: An international measurement protocol for greenhouse gases is required. Emission levels should be reported in an open and transparent manner.  Flexible Mechanisms: Better and more efficient solutions, employing both technology and sequestration, flow from responsible behavior and the marketplace.  Emissions trading and joint implementation are two flexible international mechanisms that should be employed. and Voluntary actions can be integrated into business plans and substantially reduce emissions.  Rewards and incentives can enhance delivery.  Ultimately, they may not be enough, with some mandatory steps required.  Early Action and Credit: Although managing emission levels is a long term process, near reductions will have a positive contribution and should be encouraged.  Technology Development and Deployment: A comprehensive international strategy is needed to effectively develop and deploy technology that can transform the world to a low-carbon emission structure.  Present solutions involve a substantial cost premium.  A concerted effort is required to find and apply cost effective technology.  Inclusive Decision-making: All parts of society should have the opportunity to have their needs and priorities taken into account.   Climate Change Policy Options http://www.bp.com/pressoffice/speeches/sp_970930.htm

 

No one can know the final impact of all this activity. But one thing seems certain:  a sea change has started in  corporate attitudes toward the relationship between the environment and business.It began with the European re-insurance companies commitment to action on climate change and now they are joined by BP and Browne. From a business point-of-view, the word "environment" has never represented anything positive and tangible that people could want and could buy like “transportation” and “energy”. Rather, the benefit of environmental improvements derived from getting rid of something “bad” that people did not want.  Environment has been seen mostly as a negative to businesses, something businesses were forced to spend money on to keep something bad from happening to the environment.

Now the boundary that defines that “environment” has become the corporate boundary, first, of the insurance industry and now of the oil industry. That something “bad” is their potential extinction as a business enterprise.  As Winston Churchill once said, “the thought of impending doom focuses the mind wonderfully.” If this heroic act of strategic self preservation succeeds, BP will not only have influenced many companies to conduct their business in a more environmental friendly manner, but BP would have transformed itself into a growing, sustainable Living Company whether it meant to or not.  This corporate transformation may be the greatest legacy of BP’s decision.

It appears that BP —with Browne at the wheel —will have a global impact on how business is done with respect to addressing climate change problems. It looks like the climate will change for just about everybody.
 
Update and Links

The major update to this article is the actual behavior of the global climate over the years since it was written and the continually more compelling research that climate change is real and is having major impacts. Worldwatch and the German re-insurance company, Munich Re, report that floods, fires, droughts, hurricanes, and typhoons have cost a record $89B during 1998. This is 48% higher than the previous record, set in 1996. They estimate that 1998 climate-related events have killed 32,000 people and displaced over 300 million. 

Public pressure on the corporate world will not wait for firm proof that such disasters are "caused by climate change". Other major corporations are adopting a more moderate position on climate in anticipation of such pressure. The business consensus that climate change is unproven and does not require action is breaking apart.

A dozen other transnational corporations have joined BP as advisors to the Pew Center on Global Climate Change, a nonprofit research group funded by Pew Charitable Trusts. http://www.pewclimate.org/ They include BP, Toyota, Enron, Boeing, Whirlpool, American Electric Power, 3M, DuPont, and United Technologies (a manufacturer of air conditioning, aircraft, elevators, fuel cell energy equipment, etc.).

Safe Climate, Sound Business is a web site of World Resources Institute set up in partnership  with BP, General Motors, and Monsanto. http://www.wri.org/wri/cpi/scsb/

In the Summer of 1998 BP announced plans to acquire the US oil company, Amoco. This purchase increased BP's oil reserves and US markets. Presumably it will also extend the company's climate change action strategy to Amoco operations and enable BP Solar to extend its markets through the Amoco/Enron Solar operation.
http://www.solarex.com/

As we discuss above, the next major breakthrough required in corporate action is for companies in the oil  and automotive industries to get serious about the greenhouse gas emissions of their customers. It is not enough for them to reduce the emissions of their extraction, refinining, and manufacturing operations.

Endnotes:

Acknowledgments

Peter Beadle, President of BP Solar America
Ken Blower, Director of Environment, Health and Safety, BP America
Dr. John Clarke, Associate Director of the Global Energy Technology Strategy Program led by Battle Pacific Northwest Laboratories
Hugh de Pland, External Affairs Director, BP Exploration America
Dr. Douglas B. Holmes, minergy associates
Thomas Koch, Director of _____, BP America
Dr. Stephen R. Moran, Indigo Development
John Sawhill, President, Nature Conservancy (speaking as private citizen who has supported BP's environmental awareness)
Richard Sowter, former President of BP Solar America
Ed Winterholt, Merchant of Light, BP Exploration America
Christopher Swan, Suntrain Inc.
Managers we spoke with at other oil companies preferred to not be named.

Notes

1  Browne, John. 1997. "Where BP Stands On Global Climate Change", address at Stanford University, May 19. http://www.bp.com/pressoffice/speeches/sp_970519.htm or booklet from BP London or BP America offices. See also Browne's address, "Global Climate Change: The Policy Options" delivered in Berlin September 30, 1997.
http;//www.bp.com/pressoffice/speeches/sp_970930.htm

2 Leggett, Jeremy. 1993. Climate Change and the Insurance Industry. Greenpeace, London.

3 "Insurance Firms Ask If Global Warming Swells Disaster Rate," Christian Science Monitor, March 29, 1995, Boston, MA

4  "Insurers Launch Joint Effort to Tackle Environmental Risks," Environment Watch: Western Europe. 7 April 1995, Vol. 4, No. 7. Cutter Communications, Arlington, MA.

5  "Insurance Companies Launch Environmental Initiative," Business and the Environment, May 1995 p. 9, Cutter Communications, Arlington, MA. and Leggett, Jeremy, ed.. 1996. Climate Change and the Financial Sector: The Emerging Threat, The Solar Solution. The Gerling Group. This book includes papers from executives of UNI Storebrand f Norway, the Reinsurance Association of America, the Gerling Group (German re-insurance), General Accident (UK), Union Bank of Switzerland, National Westminster Bank (UK and U.S.), and Amoco/Enron Solar. Order by fax from Martina Kaiser at Gerling Academie Verlag on 0049 89 2107 684.

6 Global Climate Coalition website: www.worldcorp.com/dc-online/gcc/gailstatement.htm  June 18, 1997.

7  Redefining Progress website: http://www.rprogress.org/pubs/ecstat.html

8  Interview with Peter Beadle, President of BP Solar America.

9  However, BP still takes a hardline on occasion. In August of 1997 BP sued Greenpeace UK for U.S.$2.28M over the NGO's occupation of one of the company's North Sea drilling sites. The Financial Times said that "BP backed down in the face of hostile reaction from politicians and environmentalists" and the threat of boycotts. "BP: From Green to Mean?" Business and the Environment, September 1997. Lexington, MA.

10 Berlin speech September 30, 1997. on web site http://www.bp.com/pressoffice/speeches/sp_970930.htm

11  Battelle PNL. 1997. Global Energy Strategy to Address Climate Change, project brochure, Washington DC.

12 Interview with Ken Blower, BP America Director of EH&S, 8/5/97..

 13  For example, warming of arctic tundra and bogs would release large quantities of methane, which increases greenhouse gas concentrations. Some studies indicate this is already happening.

14 Schwartz, Peter. 1991. The Art of the Long View. Doubleday Currency. NY. Discussions of Shell's scenario planning occur throughout the book.