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Principal decisions and stakeholders

Section 172(1) statement

The Board of Directors, having considered the matters set out in section 172(1)(a) to (f) of the Companies Act 2006 (S172), confirms, in good faith, that the Directors have acted in a way that they consider would most likely promote the success of the Company for the benefit of its members as a whole.

This S172 statement discloses how the Directors took into account the interests of Shell's wider stakeholders in the Board's decision-making process. The level of information disclosed is consistent with the size and the complexity of Shell's businesses and focuses on matters of strategic importance to Shell.

General confirmation of directors' duties

Shell's Board has a clear and robust corporate governance framework, which sets out certain financial and strategic thresholds which need to be triggered for matters to be considered and approved by the Board. The corporate governance framework sets out matters reserved for the Board, delegations to its committees and delegations to the Executive Directors. The Manual of Authority sets out the delegation and approval process across the broader business.

All Directors upon joining Shell have participated in induction training and are provided with ongoing guidance covering regulatory requirements of their role, including, but not limited to, S172.

When making decisions, each Director ensures that (s)he acts in the way (s)he considers, in good faith, would most likely promote Shell's success for the benefit of its members as a whole, and in doing so has regard (among other matters) to the issues set out below.

S172(1) (a) "The likely consequences of any decision in the long term"

The Directors understand the business and both the evolving and challenging environment in which we operate, including the challenges of the global energy transition. The Board made decisions with regard to acquisitions, investments and divestments with consideration given to key stakeholders and the likely long-term impact of any decision. During the year, the Board reiterated its commitment to Shell's energy transition strategy and reflected on the challenges to be faced by Shell in the next phase of this strategy, given the shifting macroeconomic and geopolitical context. Based on Shell's established purpose to power progress together by providing more and cleaner energy solutions, the ongoing strategy set by the Board is intended to transition Shell to a net-zero emissions energy business, purposefully and profitably. We continue to have a strong, resilient business with a focus on energy security. We put customers at the centre of our strategy, innovating the products customers need as they seek to decarbonise.

In 2023, the Board continued with its oversight of Shell's Powering Progress strategy, with four pillars: generating shareholder value, working to achieve net-zero emissions, powering lives and respecting nature. The Board focused on financial strength and discipline with a dynamic approach to our portfolio of assets and products, details of which were set out at the Capital Markets Day in June 2023 (CMD23). See our Powering Progress strategy.

The Directors recognise there are significant complexities in relation to Board decision-making, given differing societal and stakeholder views about our operations and the intricacies associated with the evolving energy transition. Accordingly, the Directors have considered S172 and made their decisions in good faith relating to Shell's strategy having regard for the long-term sustainable success of the Company.

S172(1) (b) "The interests of the Company's employees"

Shell employees are fundamental and core to our business model and the safe delivery of our strategic ambitions. The success of our business depends on attracting, retaining, developing and motivating talented employees. The Directors consider and assess the implications of relevant decisions on employees and the wider workforce. The Directors seek to ensure that Shell remains a responsible employer, including with respect to pay and benefits, fairness (including gender pay gap reporting, see the section "Our people"), diversity (information on Shell's Diversity, Equity and Inclusion is detailed in the section "Our people"), health and safety issues, and the workplace environment. The Directors regularly engage with employees and the wider workforce (a summary of engagements is provided in the section "Workforce engagement") as well as consider the annual employee survey (the most recent is detailed the section "Our people").

The Directors recognise that our pensioners also remain important stakeholders.

S172(1) (c) "The need to foster the Company's business relationships with suppliers, customers and others"

To deliver our strategy we require strong mutually beneficial relationships with suppliers, customers, governments, national oil companies and joint-venture partners. Shell seeks to promote and apply certain general principles in such relationships. The Board continues to review Shell's approach to suppliers, which is set out in the Shell Supplier Principles. In 2023, the Board reviewed steps taken with suppliers and supply chains to combat modern slavery and human trafficking. More detail on Shell's Modern Slavery Act statement is set out in the section "Other regulatory and statutory information". The businesses continually assess the priorities related to customers and those with whom we do business, with the Board engaging with the businesses on these topics, for example, within the context of business strategy updates and investment proposals.

The Directors also receive updates on a variety of topics that indicate how these stakeholders have been engaged. These updates include information provided by the Projects & Technology function on suppliers and joint-venture partners, with respect to items such as project updates and supplier contract management. Businesses also provide information, as relevant, on customers and joint-venture partners in relation to business strategies, projects and investment or divestment proposals.

The CEO provides a comprehensive update to the Board on material business and external developments at each main Board meeting. This includes: i) a report on safety performance; ii) significant operational updates relating to each of the business segments, e.g. partnerships, investments, divestments, flagship projects, commercial highlights and achievements; iii) the development of new technologies and innovation via collaboration with partners, suppliers and others; and iv) political or regulatory developments. The CEO also summarises his own external and internal engagements and any changes of senior executive staff.

S172(1) (d) "The impact of the Company's operations on the community and the environment"

It continues to be integral to our strategic ambitions to reflect on our impact on the community and the environment. The Board receives information on various topics to help it make decisions. The topics can include, for example, the net carbon intensity target, proposals to invest or divest, and business strategy reviews. The information also goes into Group-level overviews, such as updates on safety and environment performance, reports from the Chief Ethics and Compliance Officer, and reports from the Chief Internal Auditor. In 2023, the Board held meetings with Shell's in-country stakeholders, which included a staff engagement during the Board's Strategy Days in Canada, as well as with the Haisla Nation in, and the Mayor of, Kitimat. This enabled the Board to maintain and strengthen its connection with Shell's businesses, staff and other local stakeholders and provided the opportunity to gain a deeper understanding of Shell's reputation, role and contributions within the communities where we operate.

See "Understanding and engaging with our stakeholders", and in the reports of each Board committee.

S172(1) (e) "The desirability of the Company maintaining a reputation for high standards of business conduct"

Shell aims to meet the world's growing need for more and cleaner energy solutions in economically, environmentally and socially responsible ways. The Board periodically reviews and approves clear frameworks – such as the Shell General Business Principles, Shell's Code of Conduct, specific Ethics and Compliance manuals, the Ethical Decision-Making Framework and the Modern Slavery Act Statement – to ensure that high standards are maintained in Shell businesses and in Shell's business relationships. Complemented by the ways the Board is informed and monitors ethics and compliance with relevant governance standards, this helps to ensure that Board decisions and the actions of Shell companies both promote and maintain high standards of business conduct.

S172(1) (f) "The need to act fairly as between members of the Company"

After weighing up all relevant factors, the Directors consider which course of action best enables delivery of our strategy in the long-term interests of the Company, taking into consideration the effect on stakeholders. In doing so, our Directors act fairly as between the Company's members but are not required to balance the Company's interests with those of other stakeholders. This can sometimes mean that certain stakeholder interests may not be fully aligned.


The Board plays an important role in establishing, assessing and monitoring our desired culture and how it is embedded in our values, attitudes and behaviours, including in our activities and stakeholder relationships. The Board has established honesty, integrity and respect for people as Shell's core values. The General Business Principles and Code of Conduct help everyone at Shell to act in line with these values and comply with relevant laws and regulations. The Shell Commitment and Policy on Health, Safety, Security, Environment & Social Performance applies across Shell and is designed to help protect people and the environment. Under the industry Life-Saving Rules, we have a simplified and standardised approach which adopts a broader risk scope focusing on potential for harm to people, creating a greater sense of individual and team responsibility to avoid fatalities and life-changing injuries. In 2023, the focus was on failing safely, which means we recognise that people make mistakes and that our barriers need to be capable of managing the impact of those mistakes without undesirable consequences. The result is a strengthened foundation with an increased and deliberate focus on human performance, the way people, work, culture, equipment, work systems and processes interact. Our ambition remains unchanged: achieve Goal Zero, no harm and no leaks across all our operations.

To achieve our strategic goals, we need to adapt our mindset and behaviours as we navigate the increasing complexity in the world around us. At Shell we seek to have a culture that encourages the attitudes and behaviour that we believe will help us succeed. We seek to encourage:

  • Applying a learner mindset: everyone has the ability to grow, learn from mistakes and successes, and speak up openly in a safe environment. We encourage curiosity, humility, openness, helping each other to make better decisions and create more value;
  • Maximising our performance: we collaborate across boundaries and speak up when we see things that can be improved. We enable people to deliver, and we work in an integrated way with discipline, clear focus on priorities, and tangible outcomes in order to reach our full potential;
  • Increasing trust in Shell: we aim to be a valued member of the communities in which we operate, and to make a positive contribution to society. We seek to listen carefully and with humility and we have a strong desire to understand, and, where possible, adapt to the changing needs and expectations of society, especially as they relate to the environment. We build strong and trusted relationships with customers and partners which are fundamental to our collective success;
  • Living by our values and Goal Zero: we live by our values and do the right things with respect to ethics, safety, and the environment; and
  • Inspiring and engaging: we aspire to a situation where everyone feels connected to what we stand for. We build trusting and effective teams where everyone feels ownership and has a voice in how work gets done. We strive to maintain a diverse and inclusive culture.

The Board considers the Shell People Survey to be an important tool for measuring employee engagement, motivation, affiliation, and commitment to Shell. With consistently high response rates, it provides valuable insights into employee views. It also helps the Board understand how the survey's outcomes are being used to strengthen Shell culture and values.

Stakeholder engagement (including employee engagement)

The Board recognises the important role Shell has in many societies and is deeply committed to public collaboration and stakeholder engagement. The Board strongly believes that Shell will only succeed by working together with customers, governments, business partners, investors, and other stakeholders.

Continuing to work together with stakeholders is critical, particularly at a time when we and society, including businesses, governments, and consumers, face issues as complex and challenging as climate change, energy security and affordability.

We continue to build on our long track record of working with others, such as investors, industry and trade groups, universities, governments, non-governmental organisations (NGOs) and, in some appropriate instances, our competitors through our joint-venture operations or industry bodies. We believe that working together and sharing knowledge and experience with others offers us greater insight into our business. We also appreciate our long-term relationships with our investors and acknowledge the positive impact of ongoing engagement and dialogue.

The guidance on preparing information, proposals or discussion items for the Board asks for these materials to include considerations of the views, interests, and concerns of stakeholders and how management addressed them. This helps to strengthen the Board's knowledge of how the broader business undertakes significant levels of stakeholder engagement. Board minutes have also reflected key points on stakeholder considerations, where appropriate. The Terms of Reference for our Sustainability Committee (SUSCO) include, within the committee's remit: review and consider external stakeholder perspectives on sustainability issues of relevance to the Group's business, and review selected sustainability topics and matters of public concern, such as biodiversity and plastic waste.

The Board also engaged with certain stakeholders directly, to understand their views. The Board draws upon Shell's substantial in-house expertise by periodically receiving input from economics and policy experts on key political and economic themes, with some updates being presented to the Board each quarter.

Information on how the Directors have engaged with employees can be found in the section "Workforce engagement" and in the "Powering lives". The tables below include examples of how Directors have considered the interests of Shell employees and the resulting outcomes.

Principal decisions

In the table below, we outline some of the principal decisions made by the Board over the year. We explain how the Directors have engaged with or in relation to key stakeholder groups and how stakeholder interests were considered in decision-making.

To remain concise, we have categorised our key stakeholders into seven groups. Where appropriate, each group is considered to include both current and potential stakeholders. The groups are:

  • investor community;
  • employees/workforce/pensioners;
  • our customers;
  • regulators/governments;
  • NGOs/civil society stakeholders/academia/think tanks;
  • communities; and
  • suppliers/strategic partners.

Board decisions

We define principal decisions taken by the Board as decisions taken in 2023 that are of a strategic nature and significant to any of our key stakeholder groups. As outlined in the UK Financial Reporting Council (FRC) Guidance on the Strategic Report, we include decisions related to capital allocation and dividend policy.

How were stakeholders considered

We describe how regard was given to the likely long-term consequences of the decision, including how stakeholders were considered during the decision-making process.

What was the outcome

We describe which accommodations or mitigations were made, if any, and how Directors have considered different interests, and what factors they took into account.

Strategic updates

Powering Progress strategy

Shell's Powering Progress strategy was launched in 2021, and is outlined within this Annual Report. As part of the Board's continuing oversight of strategy, the Directors receive and discuss regular strategy updates including feedback from stakeholder engagements by management, investors, the media, climate activists and internal staff.

How stakeholders were considered

Energy Transition Progress and Strategy

In 2021, Shell also produced a report (the Shell Energy Transition Strategy (ETS)) with the aim of helping investors and society obtain a better understanding of how Shell is addressing the risks and opportunities of the energy transition. The ETS was put to shareholders for an advisory vote at the 2021 Annual General Meeting (AGM), and shareholders also voted on progress against this strategy at the AGMs in 2022 and 2023. In March 2024, the Board approved ETS24. ETS24 will be put to shareholders for an advisory vote at the 2024 AGM, as part of the continued dialogue on this topic. Information on our ETS is included throughout this Annual Report and the ETS24, which can be found on our website.

At the 2023 AGM, 80.1% of shareholders that voted supported our progress in this strategy. Both before and after the 2023 AGM, the Chair, CEO and some members of the Executive Committee engaged with key stakeholders to understand their views and opinions on Shell's progress on its ETS. They engaged with our largest shareholders and offered further opportunities to discuss Shell's progress on its ETS and to understand the reasons behind various voting decisions. The Chair also had an opportunity to engage directly with our large institutional shareholders during his roadshow in September 2023.

What was the outcome

Energy Transition Progress and Strategy

There are differing views about Shell's ambitions, targets and strategy to become a net-zero emissions energy business by 2050. Shell continued its dialogue with its stakeholders on the progress of its ETS, and the Board recognises the different views of each Shell stakeholder group. The Board continues to listen, learn and adapt as Shell delivers against its strategy, with consideration given to the long-term success of the organisation, as well as the interests of Shell's customers, shareholders and wider society. More information on the outcome of discussions following the 2023 shareholder advisory vote can be found in the section "Understanding and engaging with our stakeholders".

Discussions with stakeholders and feedback from those engagements were integral to the preparation of ETS24, and the Board's approval of this strategy. In this Annual Report and ETS24, we strive to provide information on Shell's progress on its ETS, along with our ambitions, targets and the clarifications our stakeholders are seeking.

Strategic updates

Insights into Shell's Canadian operations

In June 2023, the Board held in-person strategy meetings over the course of three days in Canada, providing for a number of engaging and interactive events with both internal and external stakeholders. A summary of the event is provided in the section "Board activities". The key areas of focus related to accelerating the energy transition.

Staff engagements

As part of the Strategy Days, the Board and Executive Committee had the opportunity to engage and speak directly with staff about their experience within the Shell Canada businesses. For further information on the engagement with our workforce see "Board activities" and "Workforce engagement".

Board Strategy Days

Through multiple engagements with stakeholders, the Board:

  • gained valuable insight into the operations of Shell's Canadian businesses;
  • built awareness of the local context and risks;
  • considered geopolitical contexts in connection with the energy transition and engaged with Shell staff and leaders in Canada;
  • considered feedback from a cross-section of Shell's staff on the energy transition;
  • considered key external perspectives connected to Shell's energy transition ambitions, targets and strategy; and
  • discussed core elements of the Powering Progress strategy with key customers, government officials and other stakeholders in the region.

Financial strength, cash allocation including shareholder distributions

The Board considered cash flow, the macro environment and business performance in 2023 against 2022. The Board also considered management's view of the outlook for the Group's performance, and reviewed the financial framework with specific focus on shareholder distributions. Directors approved several proposals with the aim of delivering value to shareholders and increasing shareholder distributions through a combination of progressive dividends and share buybacks.

How stakeholders were considered

A number of considerations underpinned each proposal, with proposals discussed and reviewed at certain points throughout the year. These considerations took account of the macro environment, robust business performance and outlook, the strength of the balance sheet, capital discipline, feedback from advisers and feedback from other stakeholders.

What was the outcome

In relation to the decisions to increase distributions to shareholders, the Board and management considered the views of stakeholders, the strength of the Company's balance sheet and the need to continue to invest for the future of energy. The form and timing for distributions to shareholders were announced throughout 2023, alongside the publication of the quarterly results.

The Board approved updates to the financial framework, which were announced at Capital Markets Day on June 14, 2023, including to target distributions to shareholders at 30-40% of cash flow from operations through the cycle through a combination of dividends and share buybacks. During 2023, the Board approved share buybacks of $14.5 billion, and a further $3.5 billion was announced on February 1, 2024.

Approval of Shell's detailed Operating Plan 2024-2026 (OP23)

The approval of OP23 followed an in-depth review by the Board of proposals on capital allocation, capital investment outlook, competitive outlook, operating expenses, return on average capital employed, shareholder distributions and alignment with Net Carbon Intensity targets. In the December 2023 Board meeting, OP23 was approved.

How stakeholders were considered

OP23 discussions included a full review against Shell's Powering Progress strategy, and the credibility of meeting and risks to delivery of the near- and long-term targets which were set out at CMD23. Meeting commitments made to investors is critical to building trust and confidence with our external stakeholders. The Directors also considered the financial strength of the organisation, the macroeconomic environment, and the continued heightened geopolitical risks as a result of the Russia-Ukraine war, and conflict in the Middle East. The Directors and Executive Committee balanced the priorities in the financial framework, including capital and operating expenditure commitments towards the energy transition alongside increased shareholder distributions, maintaining balance sheet strength, aspired credit ratings and Greenhouse Gas (GHG) target tracking. The plan was discussed extensively and reviewed thoroughly. Responses from investors and discussions with equity and debt market analysts were also presented to the Board for consideration. The Board asked questions to the management on the flexibility of OP23 in the event of various energy transition scenarios.

What was the outcome

Following extensive review and discussion, the overall outcome of this decision was an Operating Plan that the Board believes is robust against various scenarios and features strong optionality if needed. In particular, the Board assured itself that, as these decisions were taken, OP23 flexibly demonstrated pathways to enable delivery of Shell's near and long term targets.

We recognise that stakeholder opinions differ on the approach towards the energy transition. OP23 is based on society's demand for products and services. OP23 also supports Shell in maintaining a reputation for high standards on business conduct and health, safety, security, and environment issues. It maintains the approach to employee remuneration and benefits to pensioners. OP23 also seeks to reward our investors with returns, a strong balance sheet, capital discipline and maintain the long-term financial strength of the Company to invest in more and cleaner forms of energy and meet the current and future needs of society.

Investing in new business, acquisitions and divestments, and closures

Over the course of the year, the Board considered and approved new opportunities and projects and proposed divestments or closures. The Board continued to review Shell's withdrawal from Russian activities.

How stakeholders were considered

The Board considered the impact of decisions related to new business opportunities and divesting from existing opportunities in the context of sustainability, supply, regulations and carbon intensity. Critically, the Board reviewed the various proposals' alignment with Shell's strategy. Particular focus was given to potential benefits of certain divestments, including their potential to: create returns for shareholders; further strengthen the balance sheet; de-risk future cash flow; and avoid significant additional capital investment. As part of the discussions, the Board considered the strategic drivers for the intended divestments, including the Scope 1 and 2 emissions of each asset, anticipated regulatory changes expected to lead to value erosion, and any value opportunities afforded by the macro environment.

As part of each proposal, the respective business unit will undertake effective due diligence on prospective purchasers from a financial, reputational, as well as operating philosophy standpoint to ensure future obligations are met, or suitable mitigating measures are in place, to protect Shell and its people.

Within each divestment proposal, the Board considered if the Company was being a responsible seller of its assets and if the purchasers have the capability to manage our assets/people appropriately. Staff matters are explicitly considered during negotiations and the due diligence process for acquisitions and divestments. Comprehensive engagement plans are developed as appropriate in parallel to the negotiations.

As part of Shell's intercompany approval process, the following investments/divestments were discussed and supported by the Board.

Agreed sale of The Shell Petroleum Development Company of Nigeria Limited (SPDC)

The sale of the 100% equity interest in SPDC to Renaissance Africa Energy Company Limited (Renaissance). Completion of the transaction is subject to approvals by the Federal Government of Nigeria and other conditions.

Investment in deep-water Sparta project in the Gulf of Mexico

Development of Sparta, a development opportunity, with Equinor Gulf of Mexico LLC (Equinor).

What was the outcome

Agreed sale of SPDC

The Board approved the implementation of the strategic intent to exit onshore Nigerian oil exposure by agreeing to the divestment of Shell Petroleum Company Limited's 100% equity interest in SPDC to Renaissance, a consortium of five companies comprising four exploration and production companies based in Nigeria and an international energy group. During Board discussions, the impact for staff was considered and it was noted that SPDC's staff will continue to be employed by the company as it transitions to new ownership. Board discussions also covered how the divestment aligned with Group strategy, the value of the divestment, and impact for a number of stakeholders including shareholders. Furthermore, the Board considered how the divestment would contribute to reducing Shell's Scope 1 and 2 emissions and recognised the importance of this step in achieving no routine flaring, a commitment made at the CMD23.

Investment in deep-water Sparta Project

The Board approved the development of Sparta, a deep-water development in the US Gulf of Mexico, owned by Shell Offshore Inc. (51% operator) and Equinor (49%) The Board considered the investment in the deep-water project would support sustained liquids production, capital returns and free cash flow delivery through to 2030 at low GHG intensity. Additionally, the Board reviewed the assessment that the development opportunity aligned with CMD23 commitments, alongside consideration for the project-specific stakeholders and Shell's wider stakeholders.

Strategic Report signed on behalf of the Board

/s/ Caroline J. M. Omloo

Caroline J. M. Omloo
Company Secretary
March 13, 2024

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