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Introduces new target, but eliminates 2035 goal due to energy transition “uncertainty”
Energy giant Shell announced today the release of “Energy Transition Strategy 2024,” the first update to its “Powering Progress” strategy, launched in 2021, outlining the company’s climate transition roadmap and goals. The updated strategy includes Shell’s first interim target to reduce emissions from the use of its oil products, following years of shareholder pressure to introduce a Scope 3 value chain emissions reduction target.
Alongside the new Scope 3 target, however, Shell also eliminated a 2035 emissions intensity goal, and revised down its interim 2030 intensity goal as well.
In 2020, Shell announced a commitment to achieve net zero in its operations by 2050, and in 2021, the company launched its “Powering Progress” strategy, detailing how it will achieve its target to be a net-zero energy business by 2050 across Scope 1, 2 and 3 emissions, with initiatives including investing in renewable and clean energy solutions.
While the company had previously set 2030 targets to reduce its Scope 1 and 2 emissions, it had avoided setting an interim Scope 3 target. Scope 3 emissions represent more than 95% of the company’s carbon footprint, with “use of sold products” accounting for approximately 74%.
Shell has faced pressure from environmental and shareholder groups to set interim value chain emissions reduction targets, including the filing of a shareholder resolution earlier this year by group of 27 institutional investors representing more than $4 trillion in assets under management, led by oil and gas-focused shareholder activist group Follow This, urging the company to set a Paris Agreement-aligned medium-term target to reduce emissions arising from the use of its products.
In the company’s “Energy Transition Progress Report” released last year, Shell Chairman Andrew Mackenzie said that “the Board has considered setting a Scope 3 absolute emissions target but has found it would be against the financial interests of our shareholders and would not help to mitigate global warming.” Shell added that in order to implement a more ambitious Scope 3 target, the company would be required to reduce its sales of oil and gas products, which in the absence of a change in customer demand, “would effectively mean handing over customers to competitors.”
The updated strategy, however, included a Scope 3 target, with the company now aiming to reduce customer emissions from the use of its oil products by 15-20% by 2030 compared with 2021. Emissions from the use of oil products account for over half of the company’s ‘use of sold products.’ The company noted that emissions from oil products had already declined by around 9% in 2023 from the 2021 base, and said that the new target would represent a 40% reduction from 2016, including 8 percentage points caused by contracts being classified as held for trading purposes.
The updated strategy maintains Shell’s 2050 net zero goal and its interim 2030 to cut Scope 1 and 2 emissions in half, but the company also said that it had chosen to retire its 2035 target to reduce net carbon intensity of the products it sells by 45% due to “uncertainty in the pace of change in the energy transition,” and revised its 2030 net carbon intensity reduction target to 15% – 20%, from its prior 20% goal. Shell explained that the revision in the 2030 target was due to a shift to sell more power to commercial customers, and less to retail customers, driving a lower total growth of power sales to 2030.
Commenting on the updated targets, Follow This founder Mark van Baal accused the company of “backtracking” on its climate ambitions, putting the company’s future at risk “through policy interventions, disruptive innovation, stranded assets, and accountability for the costs of climate change.”
Van Baal added:
“With this backtrack, Shell bets on the failure of the Paris Climate Agreement which requires almost halving emissions this decade,” responds Mark van Baal, founder of activist shareholder group Follow This. “Only Shell’s shareholders can change the board’s mind by voting for our climate resolution at the shareholders’ meeting in May.”
The updated strategy also includes plans for Shell to invest $10-15 billion between 2023 and the end of 2025 in low-carbon energy solutions, in areas including electric vehicle charging, biofuels, renewable power, hydrogen and carbon capture and storage. Shell also said that it would focus its advocacy on areas “critical to the energy transition,” targeting policies supporting national net zero ambitions such as carbon pricing, and driving changes in demand and growing low-carbon solutions, while supplying secure energy.
Shell CEO Wael Sawan said:
“Shell has a very important role to play in providing the energy the world needs today, and in helping to build the low-carbon energy system of the future. Our focus on performance, discipline and simplification is driving clear choices about where we can have the greatest impact through the energy transition and create the most value for our investors and customers. We believe this focus makes it more, not less, likely that we will achieve our climate targets. By providing the different kinds of energy the world needs, we believe we are the investment case and the partner of choice through the energy transition.”
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