BP's 2018 Financial Analysis: Sustainability and Reporting Overview

This report provides a financial analysis of British Petroleum (BP) for the year 2018, focusing on the company's sustainability efforts and environmental impact. It begins with an introduction to BP's commitment to sustainable practices and the importance of sustainability reporting, particularly given its significant use of natural resources. The analysis delves into BP's history, including the environmental damage caused by the Gulf of Mexico oil spill and its subsequent impact on the company's approach to sustainability. The report examines BP's sustainability reports, highlighting the initiatives taken to reduce carbon emissions and the company's adherence to sustainability accounting standards. The report also addresses the importance of building relationships with stakeholders. The conclusion emphasizes the necessity of environmental protection and the need for companies to adhere to safety standards. References to sources used in the analysis are also included.

Financial Analysis
2018

1
By student name
Professor
University
Date: May 12 , 2018.
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Contents
Introduction………………………………………………………………….....................................................3
Analysis………………………………………………………………………………………………………………..……….…4
Conclusion…………………………………………………………………………………………………………………….….…6
Recommendations…………………………………………………………………………………………………………….…7
References.....……………………………………………………………............................................................9
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Introduction
British Petroleum is one of the largest oil and natural gas company in the world and is very much
focused on developing a more varied sustainable environment where equal weightage has been given to
the health of the environment along with the possible steps that the company can take in this regard,
going by the modern rules it has become mandatory for the companies to indulge in proper
sustainability reporting that they need to include along with their annual reports. Sustainable growth
refers to use of natural resources in such a manner that equal amount of it is available for the future
generation. Sustainable reporting is very much followed in countries all over the world. Given the BP is
using such massive use of natural resources being one of the top natural gas and oil petroleum
companies in the world, it becomes mandate for them to follow a sustainable approach in their overall
activities (YUAN, 2018).
Analysis
There is a brief history attached with BP and the unwarranted damage to the natural habitats that it has
been doing since past ages. Some six years the company ended up spilling 4.9 million barrels of oil in the
Gulf of Mexico, that caused a lot of damage to the natural environment and caused a negative impact
on the people with regards to offshore drilling of gas and natural oils. It killed more than 11 people and
caused a lot of health issues to many (Coate & Mitschow, 2017). It had a negative impact on the other
ships and the waterbody was totally devastated, it is one of the most popular disaster that has been
caused due to human activities. A lot of wild animals and water animals lost their lives due to this and
after effects continued for years to come due to this disaster, the company suffered a lot of losses due
to this and this made them realize the importance of having a sustainable approach to their activities
and taking care of the environment in which they function (YUAN, 2018). When it comes to gas and oil
company they need to take extra care because they have a lot of natural resources to use for the
company. When the disaster occurred, the company tried its best to undo the damage but it was not
possible (Maynard, 2017). The government ordered a probe into the matter and along with the
company the contractors are also taken into context. The damage done was so huge that it made the
government realize how important it is to have a sustainable approach and a basic sustainability activity
that companies should follow so that in the future they don’t have to face lot of issues with regards to
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natural resources, their use, their preservation and forming proper controls that will bound the
companies to follow it so that in future such activity does not occur again (Norberg, 2018). BP is such a
big company if it can fail at some point it is very possible that many smaller and medium companies can
end up indulging in such activities that can harm the environment (Boghossian, 2017). So, for that the
rules for sustainability and sustainability reporting was formed and in case the companies fail they need
to pay penalties, it is mandate for all the listed companies especially those that indulge in environment
related activities for the company. Gulf Mexican oil spill case was an eye opener for BP and that is
reflected in their current sustainability reports, a brief analysis of that is given below –
Sustainability Report of BP
BP now issues a detailed sustainability report every year along with its annual report in which it states
the various initiatives that have been taken by the company for the betterment of the environment and
the efforts they are putting to eradicate that have occurred before. It states that the company is
reaching the sustainability level or not and the total amount that the company is spending on this is also
stated briefly. The main aim of this report is to make the investors and the stakeholders aware of the
decisions of the company and how is it affecting the environment for the public and the overall related
elements. Sustainability reports contains declaration from the directors and the CEO where they
recognize their responsibility towards the environment and how they are abiding to their duty (Anon.,
2017). The report also contains details regarding the risk element that are associated with their activities
and how is the management mitigating the same with their actions. If the company fails in this, they will
be penalised and their license to operate can also be cancelled (Ghofiqi, 2018). For oil and natural gas
companies there is a certain limit that the company needs to adhere to with regard to It is also verified
by the auditors of the company who gives their opinion on the steps taken by the company and if the
company is following the rules stated by the authorities and none of their activities are causing harm to
the nature (Chron, 2017). It is important that all the accounting rules and regulation that have been
framed with respect to sustainable development and reporting are properly followed by the company
while framing their accounts and books and proper opinion is given on that by the auditors, the
company can also hire experts that can help them in this regard with respect to effective sustainable
maintenance (Chariri, 2017).
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There is another aspect to sustainability that not only focuses on the development and protection of the
environment but also focuses on the overall growth and development of all the stakeholders that are
related to the company in some way or the other (Delone & Mclean, 2004). The basic aim of a
sustainable approach is to build enduring relationships with the management, employees, investors,
shareholders, people who are related to the company in any way and taking the environment as the
center of all that. This is how a company that believes in a sustainable environment works
(Kusolpalalert, 2018).
As per the sustainability report of 2017, the biggest challenge that BP as a company has faced is with
respect to control of carbon emission in the environment. The 2015 Paris agreement has been set that
focuses on providing a minimum carbon emission level within the coming five years. The CEO states in
its declaration how the company as a whole is taking steps that would help in reducing the total
emission of carbon, as oil and natural gas forms the basis of a rich environment for the future. Hence
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reduction of carbon emission is important to ensure that in future the company will grow but not at the
caste of the nature (Alexander, 2016).
The report also states the steps that the management is taking for reduction of carbon emission and
how far they have been successful in that. This is how the company presents in its sustainability reports
all the steps that they have taken and the possible outcome of the same (Grundy, et al., 2017).
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The Sustainability Accounting Standards Board have been formed in 2011, that states down the
necessary guidelines that companies need to follow with respect to emission of certain materials in the
environment and has also stated the possible line of control for the companies (Abbott & Kantor, 2017).
BP is also following the same in its sustainability report and has stated the overall variance from the line
of control if any in its annual report for the investors to analyse. It is not a one day affair but a constant
effort from the management that will help in development of a clean environment where the rights of
all the parties would be entact (Alsagoff, 2010).
The sustainability report of the company can be found in the below link :
https://www.bp.com/content/dam/bp/en/corporate/pdf/sustainability-report/group-reports/bp-
sustainability-report-2017.pdf
Conclusion and Recommendations
On the basis of the overall analysis it can be said that protection of the environment is the duty of each
and every human being and hence companies should adhere to safety standards when they are dealing
with such natural resources. This is important in various contexts the most important being that the
future should have something to use and that only be possible when the present is vigilant enough in
their actions. It is very important that companies should follow all the guidelines that have been stated
by the government. This will help in preventing such accidents that occurred in case of the BP in the Gulf
mexico. Sustainablilty should be followed in each and every thing that a company does.
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References
Abbott, M. & Kantor, A., 2017. Fair Value Measurement and Mandated Accounting Changes: The Case of
the Victorian Rail Track Corporation. Australian accounting Review.
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Anon., 2017. Explaining auditors’ propensity to issue going-concern opinions in Australia after the global
financial crisis. Accunting and Finance, pp. Carson,E;Fargher,N;Zhang,Y;.
Boghossian, P., 2017. The Socratic method, defeasibility, and doxastic responsibility. Educational
Philosophy and Theory, 50(3), pp. 244-253.
Chariri, A., 2017. FINANCIAL REPORTING PRACTICE AS A RITUAL: UNDERSTANDING ACCOUNTING
WITHIN INSTITUTIONAL FRAMEWORK. Journal of Economics, Business and Accountancy, 14(1).
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Grundy, Q., Held, F. & Bero, L., 2017. A Social Network Analysis of the Financial Links Backing Health and
Fitness Apps. American Journal of Public Health.
Kusolpalalert, A., 2018. The relationships of financial assets in financial markets during recovery period
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