Varo Energy

Since the 2021 benchmark assessment, Varo has improved its target setting. Varo aims to be net zero across scope 1, 2 and 3 emissions by 2040. It aims to reduce scope 1 and 2 emissions by 40% by 2030 and scope 3 emissions intensity by 15% by 2030, compared to 2022. However, the company’s targets are undermined by its heavy reliance on unquantified offsets. Furthermore, the company should disclose the proportion of each target that will be met through direct action, rather than offsets.

Varo’s low-carbon transition relies on electric vehicle (EV) charging, renewable hydrogen production and non-mature technologies such as second-generation biofuels. However, the company does not disclose financial information on its investments in research and development (R&D) of climate change mitigation technologies. R&D expenditure on low-carbon technologies will be essential for Varo to develop a low-carbon product portfolio and be successful in a low-carbon economy. The sectoral expectation indicates that oil and gas companies should invest 77% of R&D in low-carbon projects to align with a 1.5°C scenario.

Since the last 2021 assessment, Varo has developed a low-carbon transition plan and set emissions reduction targets. It plans to transition through technologies such as second-generation biofuels, synthetic fuels, renewable hydrogen, biomethane and e-mobility. Varo reports 60-70% of capital expenditure (CapEx) on renewables and 60-70% of mergers and acquisitions (M&A) to be directed towards renewables projects from 2023. However, the company does not specify the timeline or detail of its planned CapEx. In the absence of reported information, it is unclear if the company’s planned CapEx includes activities that are not considered low carbon, such as white hydrogen, first-generation biofuels and offsetting.

Varo’s only low-carbon business model relies on second-generation biofuels made from waste sources. It has a target to produce 250,000 tonnes of second-generation biofuels by 2026. Varo’s biofuels business is an opportunity for a low-carbon compatible revenue stream. However, the company does not disclose details on the profitability, size and growth plans for this activity. This, in conjunction with the company’s almost complete reliance on high-carbon products in its sold product mix, indicates an unclear commitment by the company to further its second-generation biofuels business model.

Varo has set emissions reduction targets since the previous benchmark assessment. The company has set a target to reduce scope 1 and 2 emissions by 40% by 2030 compared to 2022. It has also set a target to reduce scope 3 emissions intensity by 15% by 2030 compared to 2022. Additionally, Varo has a net zero by 2040 target for its scope 1, 2 and 3 emissions. However, the company’s targets are undermined by its heavy reliance on offsets to reach these targets.

By 2026, the company plans to produce 250,000 tonnes of second-generation biofuels, generate 125 megawatts (MW) of renewable hydrogen and operate 700,000 EV charging sockets. Yet, it does not report spending on any of these technologies in 2021. While Varo reports planned low-carbon CapEx from 2023 onwards, it does not specify the timeline or nature of this expenditure. For instance, this planned CapEx could cover activities that are not, in fact, low-carbon in nature, such as white hydrogen, first-generation biofuels and offsetting.

There was no evidence that Varo allocated CapEx or R&D spending to climate change mitigation and carbon removal technologies in 2021. There is evidence that Varo is developing new business models for a low-carbon future. However, the business models appear to be in their initial stages and are not supported by details on their profitability, size or growth potential. The company has acquired a 49.5% share in an EV charging company and an 80% share in a biogas company, but it does not disclose levels of production at these facilities.

Due to the company’s lack of transparency on emissions and activity data for 2017-2021, Varo’s past performance on scope 1 and 2 and scope 1, 2 and 3 emissions intensities could not be assessed.

Varo’s transition plan, including a net-zero by 2040 target for scope 1, 2 and 3 emissions, is undermined by the company’s lack of scenario analysis and dependence on non-mature technologies such as second-generation biofuels. Moreover, the company does not report any CapEx or R&D investments it has allocated to these technologies. With its reliance on offsets, Varo is not prepared to achieve the level of emissions reduction required for a low-carbon transition. The company requires a significant strategic and business model shift to align with its 1.5°C pathway.

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.

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 actions 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. No public commitment by the company was found stating its intention to re- and up-skill workers displaced by the transition to a low-carbon economy. Additionally, no evidence was found that the company re- and up-skills workers in a way that ensures gender balance and inclusion of vulnerable groups.

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.

While the company has a grievance mechanism available to workers, no other policies or commitments of the company related to respect for human rights were found in the public domain. This includes the necessary policies and systems by which the company can ensure respect for basic human rights in its operations and supply chain.

The company has a publicly available policy statement committing to respect the health and safety of workers. It also has time-bound targets on women’s empowerment and discloses some information about the diversity of its workforce. However, no other policies and commitments of the company related to key decent work issues were found in the public domain. These commitments include the provision of secure, safe and healthy workplaces, where workers are fairly renumerated and have a meaningful say in decision-making.

The company has a public commitment to protect personal data and a policy commitment prohibiting bribery and corruption. However, no other company policies or commitments on key ethical business topics – personal data protection, tax, bribery and corruption, and lobbying and political engagement – were found in the public domain. This includes ensuring ethical business conduct throughout its operations and in its relationships with business partners.