Quantcast
Environmental News for a Healthier Planet and Life

Help Support EcoWatch

Shell's Latest Annual Report: More Greenwashing?

Business
Shell's Latest Annual Report: More Greenwashing?
Shell protesters. Dana Drugmand

By Dana Drugmand

Two years after internal documents surfaced showing that Royal Dutch Shell, like ExxonMobil, knew about climate dangers decades ago, the oil giant released its latest annual report outlining its business strategy and approach to addressing climate change. Despite clear warnings from scientists, global health experts and even central banks of impending climate-driven crises, Shell's report largely sends a message that everything is fine and the company's "business strategy is sound."


That is not to say that Shell is ignoring the challenges facing it and other oil majors. But overall Shell appears to be toeing the line between saying it is responding to the climate challenge and inevitable energy transition on the one hand, and maintaining its core oil and gas business model on the other.

Shell's 2019 Annual Report is filled with statements that reveal the company's perspective on the Paris agreement, the energy transition, and climate litigation and regulatory risk to its business. A few of these statements seem contradictory, and it is important to keep in mind the context of #ShellKnew when the company says now, in 2020, that it is committed to being part of the solution.

Shell’s Strategy

According to the report, there are three parts to Shell's overall strategy going forward: to thrive in the energy transition, to provide a world-class investment case, and to sustain a strong societal license to operate. That may sound good on paper, but in reality significant challenges are mounting for each of these pillars.

In terms of the energy transition, Shell appears to be paying lip service to it more than actually revamping its portfolio or overhauling its business model. Its core business remains oil and gas. Period.

The company may be ahead of some other oil giants like Exxon and Chevron in terms of adding alternative energies to its energy mix, but overall its commitment to clean energy is minimal.

Shell notes in its report that it spends "$1-2 billion a year until 2020 in different services and products from a range of cleaner sources," and "investments in power could grow to $2-3 billion a year on average" from 2021 to 2025. The vast majority of the company's capital expenditure ($24bn to $29bn in 2020) goes into oil and gas, and failure to replace proved reserves could have a "material adverse effect." Instead of aligning with the energy transition, Shell's business model is based on continual hydrocarbon exploitation.

In terms of a "world-class investment," the oil and gas sector is particularly vulnerable at the moment to financial pressure and investors are increasingly turning away from fossil fuels. Jim Cramer infamously dubbed fossil fuels "in the death knell phase." Shell acknowledges this risk. It notes in its report that fossil fuel divestment "could have a material adverse effect on the price of our securities and our ability to access capital markets."

Shell also recognizes its vulnerability to an eroding social license as the public and particularly younger generations start to scorn Big Oil.

"In 2019, many protested about climate change, sometimes directly targeting Shell," Shell CEO Ben Van Beurden wrote in the report. The company includes challenges to its reputation as a risk factor, noting, "There is increasing focus on the role of oil and gas in the context of climate change and energy transition. This could negatively affect our brand, reputation and licence to operate."

Shell did not immediately respond to a request for comment on the risk to its social license.

Shell Claims to Support Paris Agreement, Plans for Gradual Energy Transition

In its report, Shell says it fully supports the Paris agreement goal to limit warming well below 2 degrees C, and supports "the vision of a transition towards a net-zero emissions energy system." But, in contrast to fellow European oil major BP, Shell is not committing its own business to net zero emissions.

Shell says it has "no immediate plans to move to a net-zero emissions portfolio over our investment horizon of 10-20 years." Instead, Shell's Net Carbon Footprint "ambition" is to reduce emissions (including its customers' and suppliers' emissions) of its energy production and products by 20 percent by 2035 and by 50 percent by 2050. This is not aligned with climate science guidelines that say complete decarbonization or "net zero" is necessary by 2050 at the latest.

Shell's own business is therefore not aligned with the goal of the Paris agreement, and the company is facing a lawsuit over this in its home country of the Netherlands. Current emissions reduction plans or "Nationally Determined Contributions" (NDCs) submitted by countries under the Paris agreement are also inadequate. As Shell notes in its report, current NDCs amount to about 3 degrees C of warming. "In coming decades, we expect countries to tighten these NDCs to meet the goals of the Paris agreement," the report states. Shell's view appears to be that the world has decades to get its act together.

In that view, Shell says it is fully on board with the energy transition and plans to transform its own business "over time." The report includes statements like "Shell aims to become an integrated power player and grow, over time, a material new business", and, "for us, protecting the environment also means working to transform our product mix over time, for example, by expanding the choice of lower-carbon products we offer customers."

Yet, in a seeming contradiction to these statements, Shell says it "agrees with the Intergovernmental Panel on Climate Change (IPCC) 1.5°C special report," which clearly warned that limiting warming to 1.5°C would require, as Shell notes, "an even more rapid escalation in the scale and pace of change."

While Shell claims to fully support the Paris agreement, in another seeming contradiction, the company states in its report that the government action necessary to meet Paris targets could harm its business: "Policies and regulations designed to limit the increase in global temperatures to well below 2°C could have a material adverse effect on Shell – through higher operating costs and reduced demand for some of our products."

Shell also says it is wary of governments actually taking climate action: "we believe measures taken by governments to control national energy transitions may also have unintended consequences."

Yet, at the same time, Shell says it expects to be subject to increasing regulation. "We also expect that GHG regulation, as well as emission reduction actions by customers, will continue to result in suppression of demand for fossil fuels, either through taxes, fees and/or incentives to promote the sale of lower-carbon electric vehicles or even through the future prohibition of sales of new diesel or gasoline vehicles, such as the prohibition in the United Kingdom (UK) beginning in 2035. This could result in lower revenue and, in the long term, potential impairment of certain assets," the report states.

Climate Litigation Risk

Shell, like other fossil fuel companies, has long been concerned about governments imposing climate policies or regulations that would affect its business. Shell and its industry peers are already facing climate lawsuits, and Shell is explicitly identifying climate litigation as part of a broader risk factor associated with "rising climate change concern."

In its report, Shell acknowledged the lawsuits could negatively impact its financial condition: "In some countries, governments, regulators, organisations and individuals have filed lawsuits seeking to hold fossil fuel companies liable for costs associated with climate change. While we believe these lawsuits to be without merit, losing any of these lawsuits could have a material adverse effect on our earnings, cash flows and financial condition."

Shell actually foresaw climate-related lawsuits as a possibility more than 20 years ago. One of the internal documents that a Dutch news organization first uncovered (and published on the site Climate Files) is a 1998 document of Shell planning scenarios where the company hypothetically envisions a series of violent storms battering the eastern U.S., which then spur environmental NGOs to bring "a class-action suit against the US government and fossil-fuel companies on the grounds of neglecting what scientists (including their own) have been saying for years: that something must be done."

Shell Knew    

One statement from Shell's annual report rings particularly true: "Shell has long recognised that greenhouse gas (GHG) emissions from the use of fossil fuels are contributing to the warming of the climate system."

Indeed, Shell has long known that fossil fuels are warming the planet and that the consequences would be of a huge magnitude.

One internal Shell document from 1988 called "The Greenhouse Effect" warned that GHG emissions would lead to warming over the next century, likely ranging from 1.5 C to 3.5 C. According to that document, "The changes may be the greatest in recorded history." Some parts of the planet may become uninhabitable, and there may be "significant changes in sea level, ocean currents, precipitation patterns, regional temperature and weather," it says. Impacts could be severe and "could have major social, economic, and political consequences."

What did Shell do with that knowledge? It started introducing doubt and giving weight to a 'significant minority' of 'alternative viewpoints' as the full implications for the company's business model became clear.

Shell was a member of the Global Climate Coalition, a fossil fuel industry-funded group that worked to undermine climate science and block climate policy internationally. The group formed in 1988 and Shell was a member throughout much of the 1990s.

During that time Shell was not exactly upfront with its own shareholders about potential risks climate change posed to its business. The first time Shell even mentioned climate change was in a 1991 annual report. But it wasn't until 2004 that Shell made a clear warning in its annual report about financial risk associated with fossil fuel investment.

Critics have for many years accused Shell's of greenwashing — acknowledging the climate threat and touting its "commitment" to being part of the solution, despite continuing to spend heavily on oil and gas with only minimal investment in alternative energy. Shell's latest annual report suggests the company isn't deviating far from that strategy.

Reposted with permission from DeSmog.

EcoWatch Daily Newsletter

A resident works in the vegetable garden of the Favela Nova Esperanca – a "green favela" which reuses everything and is subject to the ethics of permaculture – in the outskirts of Sao Paulo, Brazil, on Feb. 14, 2020. NELSON ALMEIDA / AFP via Getty Images

Farmers are the stewards of our planet's precious soil, one of the least understood and untapped defenses against climate change. Because of its massive potential to store carbon and foundational role in growing our food supply, soil makes farming a solution for both climate change and food security.

Read More Show Less
Once the virus escapes into the air inside a building, you have two options: bring in fresh air from outside or remove the virus from the air inside the building. Halfpoint Images / Getty Images

By Shelly Miller

The vast majority of SARS-CoV-2 transmission occurs indoors, most of it from the inhalation of airborne particles that contain the coronavirus. The best way to prevent the virus from spreading in a home or business would be to simply keep infected people away. But this is hard to do when an estimated 40% of cases are asymptomatic and asymptomatic people can still spread the coronavirus to others.

Read More Show Less
California Senator Kamala Harris endorses Democratic presidential candidate Joe Biden at a campaign rally at Renaissance High School in Detroit, Michigan on March 9, 2020. JEFF KOWALSKY / AFP via Getty Images

Former Vice President Joe Biden made a historic announcement Tuesday when he named California Senator Kamala Harris as his running mate in the 2020 presidential election.

Read More Show Less
An aerial view taken on August 8, 2020 shows a large patch of leaked oil from the MV Wakashio off the coast of Mauritius. STRINGER / AFP / Getty Images

The tiny island nation of Mauritius, known for its turquoise waters, vibrant corals and diverse ecosystem, is in the midst of an environmental catastrophe after a Japanese cargo ship struck a reef off the country's coast two weeks ago. That ship, which is still intact, has since leaked more than 1,000 metric tons of oil into the Indian Ocean. Now, a greater threat looms, as a growing crack in the ship's hull might cause the ship to split in two and release the rest of the ship's oil into the water, NPR reported.

On Friday, Prime Minister Pravind Jugnauth declared a state of environmental emergency.

France has sent a military aircraft carrying pollution control equipment from the nearby island of Reunion to help mitigate the disaster. Additionally, Japan has sent a six-member team to assist as well, the BBC reported.

The teams are working to pump out the remaining oil from the ship, which was believed to be carrying 4,000 metric tons of fuel.

"We are expecting the worst," Mauritian Wildlife Foundation manager Jean Hugues Gardenne said on Monday, The Weather Channel reported. "The ship is showing really big, big cracks. We believe it will break into two at any time, at the maximum within two days. So much oil remains in the ship, so the disaster could become much worse. It's important to remove as much oil as possible. Helicopters are taking out the fuel little by little, ton by ton."

Sunil Dowarkasing, a former strategist for Greenpeace International and former member of parliament in Mauritius, told CNN that the ship contains three oil tanks. The one that ruptured has stopped leaking oil, giving disaster crews time to use a tanker and salvage teams to remove oil from the other two tanks before the ship splits.

By the end of Tuesday, the crew had removed over 1,000 metric tons of oil from the ship, NPR reported, leaving about 1,800 metric tons of oil and diesel, according to the company that owns the ship. So far the frantic efforts are paying off. Earlier today, a local police chief told BBC that there were still 700 metric tons aboard the ship.

The oil spill has already killed marine animals and turned the turquoise water black. It's also threatening the long-term viability of the country's coral reefs, lagoons and shoreline, NBC News reported.

"We are starting to see dead fish. We are starting to see animals like crabs covered in oil, we are starting to see seabirds covered in oil, including some which could not be rescued," said Vikash Tatayah, conservation director at Mauritius Wildlife Foundation, according to The Weather Channel.

While the Mauritian authorities have asked residents to leave the clean-up to officials, locals have organized to help.

"People have realized that they need to take things into their hands. We are here to protect our fauna and flora," environmental activist Ashok Subron said in an AFP story.

Reuters reported that sugar cane leaves, plastic bottles and human hair donated by locals are being sewn into makeshift booms.

Human hair absorbs oil, but not water, so scientists have long suggested it as a material to contain oil spills, Gizmodo reported. Mauritians are currently collecting as much human hair as possible to contribute to the booms, which consist of tubes and nets that float on the water to trap the oil.

A northern mockingbird on June 24, 2016. Renee Grayson / CC BY 2.0

Environmentalists and ornithologists found a friend in a federal court on Tuesday when a judge struck down a Trump administration attempt to allow polluters to kill birds without repercussions through rewriting the Migratory Treaty Bird Act (MBTA).

Read More Show Less
A spiny dogfish shark swims in the Olympic Coast National Marine Sanctuary off the coast of Washington. NOAA / Wikimedia Commons

By Elizabeth Claire Alberts

There are trillions of microplastics in the ocean — they bob on the surface, float through the water column, and accumulate in clusters on the seafloor. With plastic being so ubiquitous, it's inevitable that marine organisms, such as sharks, will ingest them.

Read More Show Less

Trending

A "vessel of opportunity" skims oil spilled after the Deepwater Horizon well blowout in the Gulf of Mexico in April 2010. NOAA / Flickr / CC by 2.0

By Loveday Wright and Stuart Braun

After a Japanese-owned oil tanker struck a reef off Mauritius on July 25, a prolonged period of inaction is threatening to become an ecological disaster.

Read More Show Less