Shell rules out more ambitious goal to cut customer emissions

LONDON – Shell has ruled out setting targets to cut emissions in absolute terms from customers’ use of its products, its chair said in a report published on Thursday as the energy company faces increased activist and investor pressure over climate.

End-user emissions, referred to as Scope 3, account for about 95% of the energy company’s greenhouse gas pollution and some investors have urged Shell to introduce medium-term targets to reduce them in absolute terms.

“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 Chairman Andrew Mackenzie said in the report.

Shell said that such Scope 3 targets would force it to reduce sales of oil products and natural gas, “effectively handing over customers to competitors”.

The rejection of the tougher emission reduction targets comes after Shell’s new chief executive, Wael Sawan, signalled this month that the company was reviewing plans for a gradual reduction to oil output.

Shareholders will vote on May 23 on a resolution filed by activist group Follow This, which asked Shell to set 2030 emissions reduction goals in line with the 2015 Paris U.N. accord on climate change.

Shell’s board has yet to issue a recommendation, but it has previously recommended that similar resolutions be opposed by investors. Last year’s resolution won the backing of 20% of the votes while Shell’s energy transition strategy received 80% backing.

Intensity measure

Shell aims to cut planet-warming gases across its portfolio – based on the emissions intensity of its fuels – by 20% by 2030 and 100% by 2050. From a 2016 base it aims to halve emissions from its own operations on an absolute basis by 2030 and said it has already reduced them by 30%.

Measuring emissions by intensity means a company can technically increase its fossil fuel output and overall emissions while using offsets or adding renewable energy or biofuels to its product mix.

A Dutch court in 2021 ordered Shell to reduce its emissions by 45% by 2030. The company has appealed against the verdict.

A group of European institutional investors is also backing a London lawsuit targeting Shell’s board over alleged climate mismanagement in a case that could have far-reaching implications on how companies tackle emissions.

“We believe our directors have complied with their legal duties and have, at all times, acted in the best interests of the company,” Shell said in its report in response to the lawsuit.

Scientists say the world needs to cut greenhouse gas emissions by 43% from 2019 levels by 2030 to have any hope of limiting global warming to 1.5 Celsius (2.7 Fahrenheit), the level scientists say can prevent the most severe consequences.