Galp Energia

In 2022, Galp allocated about 30% of its CapEx to low-carbon businesses. Though this share is still far below the sectoral expectation of 77% CapEx for low-carbon activities under a 1.5°C scenario, this is still considered a leading practice by Galp compared to how other companies performed. Between 2023 and 2025, Galp plans to allocate about USD 750 million annually to the implementation of its low-carbon transition plan, which represents 70% of the company’s planned CapEx for the period.

From 2022, Galp no longer uses hydrocarbon production-related metrics as weighting factors in employees’ incentives. The company includes climate-related issues in employee compensation, with specific key performance indicators (KPI) for executives. The carbon intensity index is a KPI for the chief executive officer and executive committee directors related to short-term and long-term incentives. In 2022, Galp also revised its employees’ performance scorecard to prioritise environmental, social and governance (ESG) metrics, including safety and decarbonisation KPIs, which now account for 25% of annual performance indicators. Eligible employees receive monetary incentives.

Galp is diversifying its portfolio beyond oil and gas and pursuing low-carbon business models to facilitate its transition. The company is committed to increasing the use of renewables and has set short- and medium-term targets for expanding wind and solar power capacity. Galp aims to reach 4 gigawatts (GW) of installed renewable electricity capacity by 2025 and 12 GW by 2030. It is also engaged in the development of biofuels, hydrogen production, lithium processing and electric mobility. The company discloses important metrics for its new business models, such as profitability, size, growth potential and deployment schedule.

Galp’s target setting has significantly improved since the last benchmark assessment. The company now has a 2050 net-zero target which includes scope 3 emissions. By 2030, the company aims to reduce its scope 1 and 2 emissions by 40%, emissions intensity in scope 1, 2 and 3 by 20%, and emissions intensity in scope 1, 2 and 3 category 11 (use of cold products) alone by 40%, compared to 2017, without reliance on offsets. To align with its 1.5°C pathway, Galp should strengthen its short- and medium-term ambition. Additionally, the company should consider setting interim targets no more than five years apart to incentivise near-term action on its long-term goals.

Galp has invested in research and development (R&D) into green hydrogen, carbon capture and storage (CCS) technologies, energy efficiency and energy storage solutions. However, the company can improve and increase transparency by disclosing supporting financial information on its R&D investments in mature and non-mature climate change mitigation technologies. Maintaining and increasing R&D expenditure on low-carbon technologies is essential for the company to develop a low-carbon product portfolio and be successful in a low-carbon economy.

While Galp includes sustainability criteria clauses in its purchase contracts, there is no indication that emissions reduction is part of its supplier engagement process. Suppliers are not obligated to report their emissions, and the reduction of emissions is not a factor in selecting new suppliers or renewing existing contracts. The company can improve by including an emissions reduction requirement in its key procurement templates and evaluating the impact of its engagement with suppliers in terms of reduced emissions.

Galp is expected to exceed its 1.5°C carbon budget by approximately 70% between 2022 and 2050. This is based on its forecasted production from existing and approved fields. The company has not committed to stopping oil and gas exploration and expansion. This does not align with the International Energy Agency (IEA) Net Zero Emissions (NZE) by 2050 Scenario, which does not allow for the expansion of producing assets beyond those sanctioned prior to 2022.

Galp has a 2050 net-zero target which includes scope 3 emissions and a quantified amount of offsets. By 2030 the company aims to reduce its scope 1 and 2 emissions by 40%, emissions intensity in scope 1, 2 and 3 by 20%, and emissions intensity in scope 1, 2 and 3 category 11 (use of sold products) alone by 40% compared to 2017. The company plans to achieve its interim targets without relying on offsets.

The company plans to allocate about 70% of its net CapEx to low-carbon projects between 2023 and 2025. Further, its transition plan includes the increase of renewable electricity generation to 4 GW installed capacity by 2025 and 12 GW by 2030, as well as the development of green hydrogen production up to 700 megawatt (MW) capacity by 2030. Galp is also planning the development of its hydrotreated vegetable oil (HVO) production, electric mobility solutions and lithium processing facility.

By the end of 2022, Galp had 1.4 GW gross operating capacity that generated approximately 1.9 terawatt-hour (TWh) of renewable electricity. HVO production in a hydrogenation unit at its Sines refinery reached approximately 101 kilotonnes (kton) and its industrial unit Enerfuel produced about 25 kton of biodiesel in 2022. Further, Galp operates more than 2,000 EV charging points across Iberia. However, the company’s total turnover from activities aligned with the EU Taxonomy was only about 0.5% of its total turnover.

Galp saw only a marginal decline in its scope 1 and 2 emissions intensity between 2018 and 2022. The company’s scope 1, 2 and 3 emissions intensity has also decreased slightly over the last five years; however, Galp is currently projected to exceed its total 1.5°C carbon budget between 2022 and 2050 by more than 70%. To align with its 1.5°C pathway, the company needs to decrease its scope 1, 2 and 3 emissions intensity by 4% annually between 2022 and 2027.

Although Galp is committed to decarbonisation, it faces the challenge of reducing its reliance on oil and gas and increasing investments in low-carbon technologies. While Galp has plans to transition, in 2022 its investments in oil and gas exploration and production outweighed those in low-carbon technologies.

No evidence was found of the company’s commitment to social dialogue or of the categories of stakeholders the company engages with on a just transition. Furthermore, no evidence was found to demonstrate the company’s ongoing social dialogue and meaningful engagement with affected stakeholders. No evidence was found of the company undertaking just transition planning to mitigate the social impacts of the low-carbon transition on workers, affected stakeholders and its business relationships. Additionally, no evidence was found to demonstrate the company’s engagement in social dialogue and with stakeholders in just transition planning.

The company has a commitment to create and support access to green and decent jobs as part of the low-carbon transition. Furthermore, the company also discloses the measures it takes to ensure that it creates jobs which embed equality of opportunity for women and vulnerable groups. It does this through targeted programmes to hire people with disabilities and makes efforts to include women in its trainee programme. However, no relevant disclosure was found of the company’s assessment of employment dislocation risks. The company has a commitment to re- and up-skill workers and stakeholders affected by the low-carbon transition and discloses actions it takes in this regard. For instance, it does this through partnerships with universities, trainee programmes and development programmes for staff. However, no relevant disclosure was found of the company embedding equality of opportunity for women and vulnerable groups in these actions. Furthermore, no relevant disclosure was found of a process for identifying skills gaps for workers and affected stakeholders in the context of the transition.

The company expects its business relationships to contribute to the social protection of their workers and affected stakeholders. However, no relevant disclosure was found to show if the company identifies impacts of the low-carbon transition on social protection for its workers and affected stakeholders, nor how it contributes to social protection. The company discloses its processes for understanding the alignment of its lobbying activities with policies and regulations that support the just transition. The company also lobbies for just transition policies and regulations, such as to boost job creation within the photovoltaic sector.

The company commits to respecting human rights and the ILO fundamental rights at work. Additionally, it discloses its processes to identify human rights risks in its own operations. However, no other evidence was found of the company’s human rights due diligence process for its own operations and its supply chain. Moreover, no evidence was found of the company disclosing the stakeholders whose human rights have been affected by its activities. The company does, however, have a grievance mechanism available to workers and external stakeholders.

The company commits to respecting the health and safety of its workers and expects the same commitment of its business relationships. It is also committed to women’s empowerment and discloses some statistics on the diversity of its workforce. However, no relevant disclosure was found on the company’s provision of living wages or working hours.

The company discloses its global tax strategy and board accountability for the strategy. However, no relevant disclosure was found on the corporate income tax it pays in each relevant jurisdiction. Additionally, the company has a policy prohibiting bribery and corruption, and it includes corresponding clauses in its business relationship contracts. The company can, however, strengthen its performance and disclosure on several key ethical business topics, including personal data protection and lobbying.