Saturday, April 11, 2009

Thoughts on BP's "Beyond Petroleum" Branding Campaign

There was brief discussion in one of our classes about how BP received criticism for its “Beyond Petroleum” branding campaign, and I thought it might be interesting to put some numbers to this issue. Note: The purpose of this blog post isn’t to comment on whether or not BP’s strategies make sense. Rather, it’s to try and show the discrepancy between what BP had been portraying through its communications and what course of action the company actually took. So here goes:

In 2000, BP launched a branding campaign that tried to convince people that company cared for the environment, and was taking steps to do so. One print ad, showcased in the International Herald Tribune, stated the following:

"Beyond... - means being a global leader in producing the cleanest burning fossil fuel. Natural Gas; means being the first company to introduce cleaner burning fuels to many of the world's most polluted cities; means being the largest producer of solar energy in the world; means starting a journey that will take a world's expectations of energy beyond what anyone can see today."


Print Ad:

While these statements were not completely false, the issue was that BP’s campaign was of the type that, according to Kanter, gave the impression that alternative energy sources were extremely important to the company. But this may not necessarily have been the case. According to Driessen of the Atlas Economic Research Foundation, BP spent $200 million investing in hydrogen, wind, and solar energy over a six-year period. The amount spent by BP on their “Beyond Petroleum” campaign? $200 million over two years (the campaign was launched in 2000). Additionally, Nielsen Monitor-Plus data shows that BP’s media spending amounted to approximately $370 million over a three-year period (2005-7). Having a favorable brand image is important, but wasn’t the level of investment in their media campaign excessive as compared to what the company investing in the technologies they were touting? Roberts from Mother Jones reports that BP invested $500 million in solar energy from 2000-05, but in 2004 invested over $8 billion in petroleum exploration and production. And in 2008, hydrogen, wind, and solar energy accounted only for around 7% of BPs capital expenditures, when in fact, according to Greenpeace, BP “continued to spend heavily on a worldwide advertising campaign which gives the false impression that alternative energy represents a core part of the company's business.” And that’s the crux of the matter.

2006/07 Ad

Print Ad Text:

Kanter (PDF):

Driessen (PDF):





Jacksonite said...

This would probably have made for a good podcast. All of the supermajors can't jump on the bandwagon fast enough but when you actually take a look at what they are doing you'll see it's the same old song and dance. But you cannot blame them. As long as there is no clear policy signal they will continue to do what they do best: increase shareholder value. Corporations don't exist to do the will of humanity: they exist to create profit. If the two goals aren't mutually exclusive and they can make money doing it then so be it.

During one of our energy finance classes here at McCombs we had the pleasure of having ExxonMobil's Asia-Pacific Controller come in and talk to us. He took a beating from some of the people in class as to why there isn't more effort on EM's part to invest in greener pastures. His reply: when it starts making big money we'll start doing it. At least you can't fault him for his honesty.

Chris Smith said...

Good points being made. I think all of the major energy companies will quickly jump on clean energy once these technologies become the greatest profit makers and reach economies of scale. Unfortunately, these companies don't have a long-term perspective with such investments and are more focused on short-term profit making for their shareholders. Thefore, government policies are needed to create incentives to lower the costs of clean energy technologies and help these techs achieve economies.

Spivey said...

Agreed, gentlemen. Agreed.
It didn’t receive a lot of press coverage (at least not much in the U.S.) in March when both BP and Shell announced their reduction in renewable energy investment. According to the Wall Street Journal, BP reduced its 2009 investment in alternative energy by 30%. More recently, BP announced it is laying off one quarter of its BP Solar division and is closing its two solar cell manufacturing and assembly plants in Maryland and Spain. According to the Guardian (UK), Shell has cancelled all future investment in wind and solar energy. Both companies said they would re-focus their alternative energy attention to biofuels.

To be honest, I think it is fine. Perhaps it just shows that their renewable energy investments were mostly lip-service to begin with (even though it’s pretty hard to call a few billion dollars ‘lip-service’). Excuse the MBA jargon, but many renewable energy options don’t fit with their core competencies anyway. There are numerous firms (small and large) who actually care about clean energy that are making progress, building projects, creating technologies, and driving the renewable energy market forward. Despite the world recession, many of the forces supporting renewable energy have aligned and we will continue to see the clean revolution progress, with or without the big oil and gas companies. I for one, who am graduating soon and want to work in alternative energy, would rather go work for a bootstrapping firm full of impassioned individuals who share a vision for clean energy than in some cubicle in a small, ignored corner of Integrated Oil and Gas Tower.

For more information related to the economic sense of BP and Shell’s decisions, see the WSJ article.

netnet87 said...

I couldn't help but share this with my dad, a BP employee for the last 10 years and Amoco before that. By no means is he a full-fledged environmentalist, but he believes in the work BP is doing and knows that good will come from it. For those of you that think that maybe oil and and gas isn't the right place for alternative energy research to occur, look back at the Space Race in the 60s. Technology improved drastically because all of the research done during the time. If that much dedication is put towards alternative energy R&D in the oil and gas sector, imagine the possibilities. And yes, BP has laid off a number of employees and cut its budget in most areas, but most of that is due to the economy and oil hitting an all time low. Just thought I'd share some thoughts of a stubborn 50-year-old accountant :)

Anonymous said...

I like your thoughts, Spivey. Do you think the plan is to let a bunch of start-ups do the intial R&D and then purchase them? The clean/alternative/green energy industry has a lot of parallels with the tech industry. Think of the guys who get bought up by Google, Yahoo, Sun (heh), Apple, etc. I imagine the major energy companies will let snap up good talent and ideas as they are developed at smaller-scale companies.

So maybe the reduction in internal R&D money isn't indicative of a companies' stance towards the environment or renewable technologies, but a smart business move. Thoughts?