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Introduction from the Chair

In 1834, Marcus Samuel Sr began importing seashells to the UK, laying foundations for a global import-export business. By the 1880s, the energy industry offered great opportunities. The "Shell" Transport and Trading Company seized these opportunities, with Marcus Samuel Jr commissioning the construction of safer and more efficient steam tankers for oil transportation. His tankers were the first permitted to navigate the Suez Canal in 1892, opening global oil markets to greater competition. Joining forces with the Royal Dutch Petroleum Company in 1907, what is now Shell, one of the world's leading energy companies, was established.

Since those early beginnings, Shell has pioneered ways of providing energy to people. In addition, the use of the oil and gas has revolutionised other industries, from fertilisers to preservatives, textiles to beauty products, and medical supplies to road materials. Now, Shell is at another turning point in its history. We are working to profitably transform our portfolio to meet our target of becoming a net-zero emissions energy business by 2050.

Shell has a vision and a strategy to transform, and the implementation of this strategy, although under way, will take time. This transformation is not just about the use of oil and gas, but goes to the root of how people live – the products we use and the foods that we eat. This journey of transformation is also not the same for everyone, there are still many in the world without access to affordable energy. The energy transition must be balanced and consider all parts of society.

At our 2024 Annual General Meeting (AGM), Shell's updated energy transition strategy will be put to shareholders for an advisory vote. This vote will indicate if our shareholders believe we are on the right track and that Shell is transforming fast enough.

The Board engaged in discussions with the Executive Committee throughout 2023 and into 2024 as the Shell energy transition strategy was reviewed, refined and aligned with the commitments made to stakeholders at Capital Markets Day in June 2023. Specific time was allocated to the topic at the Board's annual strategy days in June, and the Board discussed the energy transition at each of its Board meetings throughout 2023. In addition, when considering the appointments for new Non-executive directors, each appointment was considered alongside Shell's Principles for the Strategic Composition of the Board, which includes, amongst other criteria, specific consideration of the skills and strengths needed for the energy transition.

Board leadership and Shell's purpose

Shell's purpose is set out in the early pages of this Annual Report. Throughout this Governance report we focus on how Shell's governance operates in practice, and why we believe this is the best approach for us.

The Governance report is structured around the key themes of the UK Corporate Governance Code. Our narrative seeks to explain how governance supports and protects Shell and our stakeholders.

Shell applies the principles and the spirit of the Code. There is one instance where we adopt an approach slightly different from that suggested by one of the Code's provisions, namely Provision 5 which concerns workforce engagement. We explain this in the "Statement of compliance with the UK Corporate Governance Code" section. We consider our governance processes are appropriate, given the specific circumstances and range of factors particular to Shell, such as its global nature, size, complexity and history.

Our AGM continues to reach a wider audience through its hybrid format, allowing our global shareholder base to easily participate in proceedings. However, disruptive and unsafe behaviour from some attendees requires us to assess how we conduct this meeting in a way that provides a safe environment and meaningful engagement with those in attendance.

Information on how the Board discharges its duty in relation to key stakeholder interests, including those of our workforce, and an explanation of how it considered these when making principal decisions are set out in the "Principal decisions and stakeholders" section. In section "Board activities" we provide information about our Board activities and highlight which stakeholders we considered.

Our workforce engagement methods can be found in the "Workforce engagement" section. We continue to believe that constructive relationships built on mutual respect and transparency help Shell attract and retain employees, while supporting greater productivity and operational safety and efficiency. Ensuring that the employee voice is heard on relevant matters in the boardroom in practical ways is key to understanding the broader impact of business decisions, including with respect to organisational culture.

The Board recognises the importance of culture in delivering Shell's purpose and strategy. In December 2023 and January 2024, the Board received updates on the annual employee survey and the conduct and culture within the organisation, along with the associated risk areas (see "Conduct and culture risks"), and how the management team is seeking to evolve the Shell culture, placing people at the heart of transforming Shell's performance. Shell's culture reflects the long-held values of the organisation – honesty, integrity and respect for people. These underpin all the work we do and are embedded in our strategy and purpose. The Board will continue to increase its focus on Shell's culture to make sure it continues to align with the business strategy.

Division of responsibilities

More information on how the Board and its Committees support business operations is provided in the "Governance framework" section. In 2023, in line with the outcome of the 2022 Board evaluation, the Terms of Reference for the Board committees were reviewed and updated. Further detail on this is contained in the section "Board evaluation" and the full Terms of Reference for each committee, and the Matters Reserved for the Board are provided on our website.

Composition, succession and evaluation

In 2023, the following changes to the Board were implemented:

The appointment of Wael Sawan as CEO was effective January 1, 2023.

Cyrus Taraporevala joined the Board as a Non-executive Director of the Company, effective March 2, 2023, and Sir Charles Roxburgh and Leena Srivastava were appointed as Non-executive Directors of the Company, with effect from March 13, 2023.

Euleen Goh stood down from her role as Deputy Chair and Senior Independent Director at the 2023 AGM after nearly nine years' service. Following the departure of Euleen, Dick Boer became Deputy Chair and Senior Independent Director with effect from the conclusion of the 2023 AGM.

Martina Hund-Mejean stood down from her role as Non-executive Director from the conclusion of the 2023 AGM.

Changes were made to the membership of our Board committees. These changes are reflected in the biographies of the respective Directors.

Audit, Risk management and Internal control

Throughout the year the Audit and Risk Committee (ARC) assisted the Board to implement sound systems of risk management and internal control, oversight over Shell's financial reporting and consideration of ethics and compliance matters. A variety of standing matters and more specific topics are discussed by the ARC throughout the year, more on this can be found in the "Audit and Risk Committee Report" section.

Looking ahead

Shell is an evolving business and the vote on our energy transition strategy at the 2024 AGM, our performance against the commitments from Capital Markets Day 2023, and our acquisitions and divestments or investment in new business operations are some of the more visible steps that we have taken. Less visible steps, like internal organisational changes or policy change are also being implemented.

We are cognisant, yet accept, that not all of our stakeholders will be fully supportive of the decisions that we take, and some stakeholders will choose different methods of communicating their views and their concerns. We will continue to engage with stakeholders, and we will continue to have the humility to listen, learn and adapt as we focus and frame our strategy on the long-term success of the Company.

Like Marcus Samuel Jr did close to 150 years ago, I, and my fellow Directors on the Board, and our colleagues across the business, are working to transform Shell to meet the needs of society today and for the future while delivering strong financial returns. Your Board remain confident that Shell is up to the task ahead.

Sir Andrew Mackenzie, Chair (photo)

Sir Andrew Mackenzie
March 13, 2024

Annual General Meeting
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Audit and Risk Committee
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