On May 5th, the French oil giant Total reported poor first quarter results for 2020, much like the rest of the sector. Due to decreased consumption and the drop in oil prices, its profits fell to $34 million, compared to $3.1 billion in the first quarter of 2019. As a result, cost-cutting plans are expanding, while investments and CEO salary are decreasing. It was during this difficult time, however, that the company decided to reveal a new, unprecedented climate plan.
Total announced that it wants to become carbon neutral by 2050, "across its production and energy products used by its customers", explained the company. Comprehensively, Total says that it wants to achieve carbon neutrality worldwide by 2050 by focusing on its own activities (Scope 1 and 2*) and plans to go even further by including the use of energy products used by its customers in Europe (Scope 1, 2 and 3). Lastly, the group aims to reduce the carbon intensity of its products by at least 60%, with intermediate goals of 15% in 2030 and 35% in 2040.
"Total is committed to helping solve the dual challenge of providing more energy with fewer emissions. We are determined to advance the energy transition while also growing shareholder value," said Patrick Pouyanné. It must be stated that the oil giant had been under pressure for some time: on one hand, by civil society via climate protests and related actions, and on the other hand, through its shareholders who have been in talks with management for many months. Indeed, this climate plan was designed with Climate Action 100+, a coalition of shareholders created in 2017 to push the world's largest emitters toward low-carbon activities.
"We recognize the positive role of shareholder dialogue, like the one we just had with the Climate 100+ coalition in recent months," wrote Pouyanné. The exchange was led by BNP Paribas Asset Management and Federated Hermes: "This agreement is one of the most significant achievements for the oil and gas industry to date (…). The way companies respond to the challenge of climate change will be essential in determining their long-term competitiveness. Total is showing that the company understands the scope of this challenge", claims Helena Viñes Fiestas, Head of shareholder engagement at BNP Paribas Asset Management.
A General Assembly under climatic pressure
Beyond Climate Action 100+, the company has been challenged on its climate policy just a few weeks before its May 29th General Assembly. Two climate resolutions have been tabled. The first, led by eleven European investors, including Meeschaert, La Banque Postale AM, Ecofi, Crédit Mutuel AM, Sycomore, requests that the company reduce its emissions as part of the Paris Agreement. The resolution was coldly received by Total, preferring to draft another version after its dialogue with the management company Phitrust, as it requires the board of directors to be responsible for the group’s environmental commitments.
Total was so unable to meet shareholder demands that two of its prestigious competitors took the lead. In March, Bernard Looney, recently appointed CEO of BP, announced that he would aim for carbon neutrality by 2050 via 10 numerical objectives. A month later, Shell committed to the same goal. Smaller players like Equinor and Respsol have taken a similar path. Total, which had already started the shift towards renewable energies, could no longer wait or it would severely and unjustifiably lag behind.
*Scope 1 corresponds to direct emissions resulting from burning fossil fuels. Scope 2 relates to indirect emissions linked to the consumption of electricity, heat or steam required to manufacture the product. Scope 3 corresponds to other indirect emissions, such as the extraction of materials purchased by the company, or the use of products by customers.