Phillips 66 is a publicly listed semi integrated company headquartered in USA. In 2020, it had USD 114.22 billion in revenue and a reported 14,600 employees*. Phillips 66 transports, refines and retails oil and gas products, primarily oil. The company lacks a credible strategy to transition to the low-carbon economy and lobbies against climate policy.
Phillips 66 has not set any targets to reduce the intensity of its greenhouse gas emissions or its absolute emissions. Without emissions reduction targets for its scope 1 and 2 emissions and its scope 1, 2 and 3 emissions, the level of the company’s climate ambition cannot be assessed. At its 2021 annual general meeting, a majority of the company’s investors approved a proposal for the company to set emissions reduction targets that include scope 3 emissions, which account for nearly 87% of the company’s total emissions. Phillips 66 should endeavour to set long-term as well as intermediate targets that are aligned with its 1.5°C pathway.
Phillips 66 has an Energy Research and Innovation group that carries out research into low-carbon avenues. The research group is currently exploring areas like next-generation batteries and solid oxide fuel cells. The company does not currently disclose what proportion of its research and development (R&D) investments are allocated to low-carbon and mitigation technologies. The company also provides no information on how much it invests in carbon dioxide removal and carbon capture, use and storage (CCUS) technologies. Disclosing this information would demonstrate the company’s commitment to using its low-carbon R&D to support its transition to the low-carbon economy.
Phillips 66 has seen only a marginal decrease in its scope 1, 2 and 3 emissions intensity between 2014 and 2019. This can likely be attributed to an increase in the proportion of gas in its portfolio, which has a lower in-use combustion factor than oil. To deliver the annual reduction of about 4% in scope 1, 2 and 3 emissions intensity between 2019 and 2024, as required by its 1.5°C pathway, Phillips 66 will need to rapidly scale up its sales of low carbon energy. However, the company has not disclosed its current or expected revenue from low-carbon products, suggesting it does not yet have a substantial low-carbon portfolio.
Phillips 66 needs a detailed plan to undertake a low-carbon transition in a controlled manner. Aside from its stated commitment to improve ‘the energy efficiency and greenhouse gas emissions of manufacturing sites’, the company has no emissions reduction targets or other climate change KPIs. The company has not set out whether or how it will allocate capital expenditure (CapEx) to low-carbon innovation and lacks an internal carbon price. Although the company has introduced some short-term measures for producing hydrogen, renewable diesel and electric vehicle materials, it has no clear plans for the development of these and other low-carbon business areas.
As an oil refiner and retailer, Phillips 66 can use its purchasing power to drive reductions in emissions by companies upstream. Phillips 66 is the oil and gas industry’s largest purchaser of heavy Canadian crude oil, which is highly emissions intensive. There is no evidence that Phillips 66 has a strategy or is undertaking initiatives to drive reductions in its suppliers’ emissions. The company can take action by setting joint emissions reduction targets with key suppliers, financing low-carbon innovation in the supply chain and monitoring suppliers’ emissions performance.
Phillips 66 actively opposes climate policy, both directly and through the trade associations in which it plays a prominent role. The company is reported to have given USD 7.2 million to a campaign that successfully opposed a carbon fee ballot in Washington State. The CEO of Phillips 66 holds an influential position as Chairman of the American Petroleum Institute, while another Phillips 66 executive sits on the board of the Western States Petroleum Association. The company is also a member of the American Fuel and Petrochemical Manufacturers. All these three trade associations have been reported to have opposed climate policy. Phillips 66 currently lacks a process to ensure the trade associations it is a member of do not oppose climate policy. However, a majority of its investors voted for a proposal at its 2021 annual general meeting requesting the company to issue a report on climate policy engagement, including engagement carried out by its trade associations.
Phillips 66 receives a trend score of -. If the company were reassessed in the near future, its score would likely decrease. Phillips 66’s scope 1, 2 and 3 emissions intensity is projected to only see a negligible decrease between 2019 and 2024 and is not expected to achieve the annual reduction of 4% required by its 1.5°C pathway. The company has no emissions reduction targets, nor does it have a detailed transition plan or commitments to dedicate CapEx to low-carbon projects. At the company’s 2021 annual general meeting, a majority of the investors approved a proposal for the company to set emissions reduction targets that include scope 3 emissions. External pressure such as this may help drive a change in the company’s strategy and increase its commitment towards the low-carbon transition.
Phillips 66 has failed to set any emissions reduction targets and lacks a clear climate strategy. The company is aiming to build capacity to produce over 55,000 barrels per day of biofuels by 2024. Aside from this, the company has not reported detailed plans for any low-carbon business areas it intends to develop.
Phillips 66 lacks a detailed transition plan. The company is upgrading refineries to produce renewable diesel and is also carrying out research into battery technology. However, it has not stated the amount of CapEx it dedicates to low-carbon innovation or the proportion of its R&D expenditure that focuses on low-carbon and mitigation technologies.
Phillips 66’s current product portfolio is comprised of around 91% oil and 9% gas. The company does not appear to have substantial sales of low-carbon products and does not disclose its revenue from low carbon products.
Phillips 66 absolute scope 1, 2 and 3 emissions are estimated to have increased by about 5% between 2014 and 2019. The company has also consistently sought to oppose climate policy, both directly and through trade associations in which its board members play a prominent role.
The absence of intermediate and long-term emissions reduction targets and detailed plans for developing low-carbon business activities, as well as the company’s continued opposition to climate policy, suggest that Phillips 66 is neither ready for, nor committed to the low-carbon transition.
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Houston, Texas, United States of America