Valero Energy

Valero has a 2035 target to reduce/displace the operational (scope 1 and 2) emissions from its refining segment by 100% and an interim target of 63% by 2025, compared to 2011. However, the company still has not set any targets to reduce its scope 3 emissions and it has not committed to doing so in the future. Additionally, it is unclear if the achievement of these targets is based on the inclusion of avoided emissions or offsets. The company should set comprehensive targets which include all of its value chain and focus on direct emission reduction rather than avoided or offset emissions. Setting regularly spaced intermediate targets will incentivise near-term actions on longer-term goals.

Valero has publicly available conduct guidelines for business partners, which expects suppliers to reduce emissions and have sound environmental management systems. However, emission reductions are not specifically required for existing or new suppliers, neither is public reporting of emissions. The company claims to engage with its suppliers on alternatives to further reduce the carbon intensity in feedstock, energy sources, fuel production inputs and distribution, although details are not provided. As a midstream company, Valero has an opportunity to engage with its value chain and should partner with suppliers to develop low-carbon products and reduce value chain emissions.

Valero recently provided over USD 2 million to American Fuel & Petrochemical Manufacturers and approximately USD 1.5 million to Western States Petroleum Association. These associations hold positions which oppose climate policies. Valero itself supported the Texas Senate Bill 1261 which would limit local jurisdictions’ ability to regulate greenhouse gases. The company also encouraged shareholders to vote against a proposal to align company strategy to the goals of the Paris Agreement. Valero can increase its credibility by defining a supportive position on climate policies and withdrawing membership from associations that oppose climate policies.

Valero plans to expand its renewable diesel and ethanol production as alternatives to oil refining. Even though the renewable diesel is produced from waste products, more transparency is needed to understand whether these sources are aligned with the low-carbon transition. Ethanol production which uses corn as its feedstock is not considered to be a low-carbon solution. Additionally, these plans are lacking medium and long-term actions and targets. The company should develop a plan to further expand the production of low-carbon fuels and reduce its reliance on oil refining.

Valero has set a more ambitious target for the emissions from its operations (scope 1 and 2) to reduce/be “displaced” by 100% by 2035 with an interim 2025 target of 63% reduction. However, it is not fully disclosed to what extent these targets will be achieved via the use of offsets and the inclusion of avoided emissions, rather than direct emissions reduction. The company has not set any targets for scope 3 emissions.

The company plans to achieve its targets via a combination of absolute reduction of global refinery emissions through efficiencies and the described “displacement” of emissions by increased production of lower carbon fuels (ethanol and renewable diesel) and CCS. The definition of “displacement” is not clearly specified.

Valero’s capital investments in ethanol and renewable diesel make up 11% of the total figure. In 2021, USD 538 million was dedicated to described “low-carbon growth investments” and in 2022 this figure went down to USD 385 million. In 2022, the company’s renewable diesel capacity was 1.2 billion gallons per year. This is equivalent to only approximately 2% of the company’s oil refining capacity. Valero also has 1.6 billion gallons per year capacity for corn ethanol, although this fuel is not considered low-carbon in this assessment, as it uses food crops rather than waste products.

Valero’s scope 1, 2 and 3 emissions intensity was stagnant between 2017 and 2022 and is projected to remain largely stagnant between 2022 and 2027. To align with its 1.5°C pathway the company needs to decrease its scope 1 and 2 emissions intensity by approximately 6% annually and scope 1, 2 and 3 emissions intensity by over 4% annually.

Despite the company’s investments and strategy to further develop its biofuels production, Valero’s low-carbon transition is undermined by the company’s opposition to climate policies, its aims for displacement rather than direct reduction of its refining emissions and the absence of commitment to reduce its scope 3 emissions.

No evidence was found of the company’s commitment to social dialogue or disclosure 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 its just transition planning.

The company discloses the actions it takes to create jobs, such as investments in a renewable diesel plant which bring new job opportunities. However, no public commitment by the company was found stating its intention to create and support access to green and decent jobs as part of the low-carbon transition. Moreover, no evidence was found of the company’s action to promote these jobs in a way that ensures gender balance and inclusion of vulnerable groups. Additionally, no relevant disclosure was found of the company’s assessment of employment dislocation risks. The company discloses the measures it takes to embed equality of opportunity for women and vulnerable groups as it is providing training opportunities. It does this through programs that provide vocational skills training to disadvantaged communities, and supports education for girls.

No relevant disclosure was found to show if the company identifies impacts of the low-carbon transition on social protection for workers and affected stakeholders, nor how it contributes to social protection. Additionally, no evidence was found that the company expects its business relationships to contribute to the social protection of their workers and affected stakeholders. No relevant disclosure was found to show how the company identifies any misalignment of its lobbying activities with policies and regulations that support the just transition, nor of the measures it takes to address misalignment. Furthermore, no evidence was found that the company lobbies for policies and regulations for green and decent job creation; retention, education and reskilling; and social protection for workers.

The company commits to respecting human rights and the ILO fundamental rights at work, and it expects its business relationships to respect the ILO fundamental rights at work. However, no evidence was found of the company’s process to identify, assess and mitigate salient human rights risks in its own operations and 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. Furthermore, the company states that it has achieved paying all workers a living wage. Additionally, the company discloses some information on the diversity of its workforce. The company can however strengthen its disclosure on these subjects as well as on working hours practices.

The company commits to protecting personal data, has a policy prohibiting bribery and corruption and expects that it business relationships also prohibit the same. Additionally, the company has a lobbying and political engagement policy, and it requires third-party lobbyists to comply with its lobbying and political engagement policy. The company can, however, strengthen its disclosure on these topics as well as on responsible tax practices.