Shell’s turnover last year was sustainable for a maximum of 0.2 percent according to new European standards. This is evident from the recent annual report of the oil and gas company. The ‘green’ turnover in 2022 was 750 million dollars – out of a total of 380 billion.
If all of Shell’s sustainable activities meet the strict European criteria, green turnover will increase to a maximum of 3 percent of the total. But we are not there yet. The vast majority of the turnover, the remaining 97 percent, cannot be regarded as sustainable anyway according to the standards. This concerns, for example, oil extraction.
The annual report also shows that, according to the new standards, 9 to 10 percent of Shell’s investments last year are considered sustainable. The group has made other investments that qualify for the designation ‘sustainable’, but these did not (yet) meet all the requirements. If that were the case, their share of total investments would rise to 21 percent, compared to 18 percent a year earlier.
joint ventures
Shell has been reporting its ‘sustainability scores’ under the new EU standards for a few years now, even though it is not required by law now because it is based in the UK. The company does this for the sake of “transparency”, it explains. The annual report states that the sustainability scores according to European standards do not provide a “complete picture” of Shell’s activities. For example, the rules do not allow the sustainable energy production of companies or wind farms of which the group is only a partial owner to be counted.
Shell also points out that the EU rules are still being developed and are not yet sufficiently elaborated. “In the first years of the European taxonomy, the efforts of large companies in particular become more important [de normen voor duurzame activiteiten] underestimated,” said a spokesman. “For example, we cannot include the turnover of joint ventures such as the Blauwwind wind farm. If that were possible, the numbers would be higher.” In addition to Shell, Van Blauwwind, off the coast of Zeeland, is also owned by energy company Eneco and offshore company Van Oord, among others.
According to Mark van Baal of the activist shareholder organization Follow This, the data on sustainability in the annual report show that Shell will continue as much as possible as before. “Five years ago, the company was the first of the oil giants to commit to participating in the energy transition. But if you now only invest one tenth in sustainable energy, renewable energy will remain fringe. We do not expect the numbers to change significantly if investments in joint ventures are included.” Next month, Follow This will submit a climate resolution for the seventh time at Shell’s shareholders’ meeting, calling for policy to be aligned with ‘Paris’.
Shareholders behind Shell
In his review of 2022, Chairman of the Supervisory Board Andrew Mackenzie emphasizes that almost 80 percent of shareholders supported Shell’s transition policy. The motion of Follow This could then count on more than 20 percent of the vote. “As long as the shareholders do not vote en masse for our climate resolution, the company will continue as usual,” says Van Baal.
The sustainability of Shell has received extra attention due to the lawsuit filed by Milieudefensie. Almost two years ago, the environmental movement forced the court in The Hague that the group has “a serious effort obligation” to reduce its entire CO2emissions by 45 percent by 2030, compared to 2019. Shell’s annual report hardly mentions the lawsuit.
According to lawyer Roger Cox of Milieudefensie, the group shows that it is not implementing an important part of the judgment. It reduces emissions from its own operations, but has no absolute emission reduction targets for the products it sells. These emissions make up about 95 percent of the emissions.
Shell’s appeal in this case will be heard later this year. “This will certainly be discussed on that occasion,” says Cox. “This policy illustrates Shell’s attitude towards its climate commitments.”
According to climate lawyer Tim Bleeker, Shell’s current policy is not in line with the climate order of the court in The Hague. “Although it is not an obligation of result, it is a serious obligation of effort. Shell therefore ‘only’ has to do its best. But if you don’t even include the objective in your policy, it seems to me that there is clearly no question of major efforts.”
Milieudefensie has only demanded a general reduction order, without penalty payments or prohibition of specific projects. Bleeker points out that if Milieudefensie still wants to claim something like this, a new legal course will be needed. There don’t seem to be any plans for that. “You can already say that Milieudefensie and other organizations are stronger if Shell wants to develop new oil and gas fields, for example. As long as this judgment stands, it will be difficult for Shell to defend that this fits within the imposed ‘considerable effort obligation’ to reduce emissions.”
Shell expressly opposes ignoring the court ruling. “Any suggestion in this direction is misleading. The court gave Shell until the end of 2030 to comply with the reduction obligation and gave us – in the words of the court – ‘all freedom’ to determine how this reduction should be achieved.”
According to the spokesperson, the group is taking “active steps to comply with the court ruling. We are making progress in reducing our emissions and helping customers become more sustainable.”
Van Baal of Follow This agrees with climate lawyer Bleeker that Shell has largely ignored the verdict. He contradicts that a reduction of all emissions by 45 percent is almost impossible in practice. “There are two ways to get the court ruling. Either by halving your company, or by replacing fossil energy with sustainable energy. The latter is the solution we have in mind. And that requires major investments.”
A version of this article also appeared in the newspaper of April 6, 2023