Shell

Shell has set a target for net-zero scope 1, 2 and 3 emissions by 2050. However, the company lacks interim targets to achieve its scope 1 and 2 emissions reduction goal, with only one interim target, a 50% reduction by 2030 compared to 2016. Shell plans to use offsets to achieve its emissions reduction targets. However, the company should look to reduce emissions through direct action instead of using offsets. In addition, it should look to set intermediate targets no more than five years apart to incentivise near-term action on its long-term goals.

In 2022, Shell spent USD 4.3 billion of its capital expenditure (CapEx) on renewable and energy solutions. This is the equivalent of 17.2% of its total CapEx in 2022, remaining consistent with the previous benchmark assessment. Shell plans to allocate a CapEx of USD 2-4 billion for renewable and energy solutions in 2023. However, Shell includes gas as part of its renewable and energy solutions, which is not considered low-carbon under this benchmark assessment. Moreover, the company’s CapEx spending falls below the sectoral expectation for oil and gas companies to dedicate 77% of their total CapEx to low-carbon solutions.

Shell has a strong policy and review process in place for its engagement with trade associations, which contains board-level oversight. Despite this, the company is found to support several trade associations with negative climate positions. For example, Shell has board-level involvement with the American Petroleum Institute (API), which is reported to have opposed numerous climate policies in the US. Shell can show leadership in this area by withdrawing from trade associations known for negative positions on climate policies.

Shell is diversifying its business model to include low-carbon activities. The company is involved in renewable electricity, electric vehicle (EV) charging, biofuels, renewable hydrogen, and hydrogen production using gas and carbon capture and storage (CSS) as well as wider CCS projects. The company provides information about the growth potential and deployment schedules for these new business activities. However, it lacks specific details about their profitability and current size. Shell needs to provide clear information on the planned scale-up of these activities to demonstrate its commitment to strategic repositioning.

Shell has implemented a low-carbon transition plan with a target for net-zero scope 1, 2 and 3 emissions intensity by 2050. The company further supports this with a series of short-, medium- and long-term interim targets. Shell has also introduced a target to reduce scope 1 emissions by 25% by 2025. Additionally, it has brought forward its zero routine flaring initiative to 2025 and aims to reduce methane intensities to below 0.2% by 2025.

Shell’s Powering Progress strategy is focused on its goal to be a net-zero emissions energy business by 2050 in line with the Paris Agreement. The company has set out financial commitments within its transition plan, which is informed by a 1.5°C and well-below 2°C scenario analysis. Shell has also developed a series of new business models to diversify its energy mix. The company has developed activities in the following areas: renewable electricity, biofuels, hydrogen, EV charging and CCS.

Shell has invested USD 4.3 billion in low-carbon CapEx and USD 440 million in low-carbon mitigation research and development (R&D), which accounts for 41% of its total R&D spending during 2022. The company is investing in a range of CCS projects, supplying sustainable fuels, and expanding solar and wind capacity through recent acquisitions. It has also announced investment in a 200 megawatt (MW) hydrogen electrolyser, planned to be operational by 2025.

Shell’s scope 1, 2 and 3 emissions intensity has remained the same since 2020, and it is projected to increase slightly over the next five years, between 2022 and 2027. To align with its 1.5°C pathway, Shell needs to decrease its scope 1, 2 and 3 emissions intensity by approximately 4% annually until 2050. Moreover, the company’s locked-in scope 3 emissions are projected to exceed its carbon budget by about 40% between 2022 and 2050.

Though Shell has a detailed transition plan, which includes net-zero targets for all scopes of emissions by 2050 and is informed by strong scenario analysis, the company is not yet fully committed to the low-carbon transition. Shell needs to grow its low-carbon businesses to reduce dependence on high-carbon activities. It also needs to cease its exploration for new oil and gas assets across multiple locations, including the Gulf of Mexico, as further exploration of fossil fuel assets is unsanctioned under the International Energy Agency (IEA) Net Zero Emissions by 2050 Scenario and is inconsistent with its 1.5°C pathway.

While the company discloses the categories of stakeholders it engages with on a just transition, including employees, employee representative bodies and relevant government bodies at a local level, no evidence was found that the company commits to engaging in social dialogue with workers and unions. 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 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. However, 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 has a commitment to reskill and upskill workers and stakeholders affected by the low-carbon transition and discloses the actions it takes in this regard. For instance, it provides skills and entrepreneurship programmes to local communities. Furthermore, the company discloses the measures it takes to embed equality of opportunity for women and vulnerable groups in these actions. It does this through offering talent acceleration and leadership programmes, mentoring and sponsorship to women. However, no relevant disclosure was found of a process for identifying skills gaps for workers and affected stakeholders in the context of the transition.

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. The company discloses information on the misalignment of its lobbying activities with policies and regulations that support the just transition. However, no evidence was found 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. The company also has a clear process to identify its human rights risks to and impacts on people. However, no evidence was found that the company assesses salient human rights risks in its own operations and in its supply chain. The company does take action to mitigate these risks in its own operations and in its supply chain, and it engages with affected stakeholders. Moreover, the company has 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. However, no evidence was found of the company having a time-bound target for paying all workers a living wage. Moreover, no evidence was found that the company discloses the proportion of its direct workforce covered by collective bargaining agreements or its required working hours. The company discloses some indicators of workforce diversity, including age and gender of its workforce by employee category. However, no relevant disclosure was found of additional indicators of workforce diversity. The company commits to gender equality and women’s empowerment.

The company commits to protecting personal data and has a privacy statement regarding the collection, sharing and access to personal data. The company also discloses its global tax strategy and the corporate income tax it pays in each relevant jurisdiction. The company has a policy prohibiting bribery and corruption, and it includes corresponding clauses in its business relationship contracts. Additionally, it has a lobbying and political engagement policy, and it specifies that it does not make political contributions. No relevant disclosure was found of the company’s expenditure on lobbying activities.