“As we work towards a lower-carbon future it will be necessary to rely on a variety of energy sources.”
Welcome to Shell’s Sustainability Report for 2014. It has been a year of uncertainty, with a falling oil price towards the end of 2014 and geopolitical instability in regions such as the Middle East. We continue to take a long-term view of our business and remain in a strong position commercially.
The international dialogue about how to address climate change gained pace during the year, particularly with the joint announcement by the USA and China to set emissions targets. Climate change remains one of the most pressing challenges facing the world.
The energy transition
Today, an energy transition is taking place: a slow but steady shift from a predominantly carbon-based system towards one of net-zero carbon emissions. At the same time, there are more than 1.2 billion people globally who still lack access to modern energy. For these people, the availability of affordable energy is a basic need. Energy can help people move out of poverty, support businesses and grow local economies. This poses a challenge for policymakers and others, including the oil and gas sector: how to provide people with affordable energy while reducing carbon emissions.
The world needs to meet the energy demands of a global population projected to reach nine billion by 2050. This will require continued growth in renewables and improvements in energy efficiency. As we work towards a lower-carbon future it will also be necessary to rely on a variety of energy sources. This includes fossil fuels with technologies that reduce emissions such as carbon capture and storage (CCS).
There is no simple answer or single approach to this energy transition. The world needs tailored policies appropriate for countries at varying stages of development. Advanced economies will need to review their energy mix to ensure they make the best use of all options, including renewables and lower-carbon energy solutions, whereas emerging economies may need to make use of their own resources, if available.
To meet these differing needs and move towards a lower-carbon future, we need policy frameworks that support more energy-efficient systems; lower-carbon options such as gas; CCS to reduce CO2 emissions; and renewables – areas in which Shell is already working. Innovation will play a key role in making this happen. We are developing advanced biofuels and looking closely at future technologies such as hydrogen-based fuels. Governments can also support progress by introducing effective carbon trading systems and carbon pricing mechanisms to encourage investment in lower-carbon technologies.
At Shell, we have long been known for our strong focus on safety with the goal of no harm and no leaks in our operations. Respect for people, their safety, their communities and the environment remain top priorities.
Sustainability at Shell includes our being a respected and valued member of society, which is essential to the longevity of our business. It informs our business decisions and is embedded in our company culture and has long been part of our Business Principles and our day-to-day operations.
At every stage of our operations we seek to reduce our impact on the environment and listen to the communities with which we work. This helps us to understand the indirect effects of our operations, both positive and negative, and to contribute where possible to the communities’ needs. The Arctic is a case in point, we will only go ahead with exploration when we are fully prepared and ready to do this responsibly.
Within Shell, we need to do more to reduce our emissions and energy use within our operations. We are taking steps to reduce our flaring and fugitive methane emissions. We have signed up to the World Bank’s initiative to end continuous flaring by 2030 and are collaborating with partners in the oil and gas industry to design and implement common standards on methane emissions. This work is critical if cleaner energy from oil and gas is to be part of a lower-carbon future.
As a global energy company, we have a significant role to play in the energy transition. Shell’s ability to innovate combined with our experience of working in partnership with others means that we can be essential participants in the emerging energy system. We are already working with governments in countries that include China and the Netherlands, to help design policy frameworks for developing their energy systems. This approach could be replicated in other countries. All must work together to create effective policies and solutions that provide communities with the energy they need.
Our Sustainability Report details our activities during 2014. The report builds on our commitment to sustainability and transparency over the years – we were a founding member of the United Nations Global Compact and continue to support its principles on human rights, labour, the environment and tackling corruption.
I would like to thank the members of the External Review Committee, consisting of leading sustainability experts, for their input to the report this year. Their contributions are highly valued.
Ben van Beurden
Chief Executive Officer