Introduction and Governance

Introduction

Respecting nature is part of our Powering Progress strategy. We recognise there is a growing global urgency to protect and enhance biodiversity, conserve fresh water and use resources more efficiently. As a business, we use natural resources such as land, water and materials for our operations. Our activities can have an impact on nature through discharges and emissions to the environment, and through changes to the use of land and water, including oceans.

In 2003, we decided not to explore for, or develop, oil and gas resources in natural and mixed World Heritage Sites.

Since launching our Powering Progress strategy in 2021, we have:

• worked to embed respecting nature into our activities and business processes;
• enhanced our internal performance management systems to track and report on progress; and
• continued to build employees' awareness, knowledge and skills to deepen their understanding of respecting nature.

We are also updating our environmental standards and guidance used by our projects and facilities around the world.

In 2023, we reviewed our progress and performance on respecting nature. We consolidated our respecting nature ambitions announced as part of our Powering Progress strategy in 2021 into the following themes: having a positive impact on biodiversity, aiming for zero waste and using water, other resources and materials efficiently.

We have already achieved some of the respecting nature commitments we set when we launched Powering Progress. Our commitment to reduce fresh-water consumption in highly water-stressed areas by 15% was achieved ahead of the target date of 2025. We have also conducted detailed assessments to inform our approach to fresh water and waste, which will be tailored to local conditions. We are working to help develop a viable circular economy for plastics but have concluded that the scale of our ambition to use 1 million tonnes of plastic waste a year in our global chemical plants by 2025 is unfeasible due to lack of available plastic waste feedstock, slow technology development and regulatory uncertainty.

The remaining commitments announced in 2021 have either been incorporated into our new Safety, Environment and Asset Management (SEAM) Standards, which take effect from mid-2024, or are included in the relevant business objectives and processes.

Governance

Respecting the environment and local communities has been integral to the way we do business for many years, as set out in the Shell General Business Principles and the Shell Commitment and Policy on Health, Security, Safety, the Environment and Social Performance (HSSE & SP).

Our Executive Committee is accountable for the delivery of respecting nature, progress towards which is reviewed by our Board's Sustainability Committee (SUSCO).

Environmental standards

Shell's global environmental standards are set out in our HSSE & SP Control Framework and we seek to apply them wherever we operate. Our approach draws on external standards and guidelines, such as those developed by the World Bank and the International Finance Corporation. Our environmental standards include details of how to manage emissions of greenhouse gases (GHG); consume energy more efficiently; reduce gas flaring, and monitor and improve air quality; prevent spills and leaks of hazardous materials; use less fresh water; and conserve biodiversity.

When planning new major projects, we conduct detailed environmental, social and health impact assessments. The Shell HSSE & SP Standards require that we certify our major installations against an internationally recognised independent environmental management system standard if they have significant environmental risks. Major installations are crude oil and natural gas terminals; gas plants; manned offshore and onshore production platforms or flow stations; floating production and storage vessels; refineries; chemicals manufacturing facilities; mines; or upgraders. For the purpose of this Report, we did not count each major installation in Upstream and Integrated Gas separately. They were aggregated into their respective operating unit or operating company, such as Shell Upstream UK or Nederlandse Aardolie Maatschappij (NAM), in line with the scope of their certifications. At the end of 2023, 89% of major installations within that scope and operated by Shell were certified against the ISO 14001:2015 Environmental Management System or were in compliance with equivalent environmental frameworks required by local regulations. We are pursuing certification for the remainder. In addition, many installations that are not classified as major, such as lubricant plants or supply terminals, are also certified against ISO 14001:2015 Environmental Management System but are not included in the data above.

Environmental costs

We are subject to a variety of environmental laws, regulations and reporting requirements in the countries where we operate. Infringing any of these laws, regulations and requirements could harm our reputation and ability to do business, and result in significant costs, including clean-up costs, fines, sanctions and third-party claims.

Ongoing operating expenses include the costs of preventing unauthorised discharges into the air and water, and the safe disposal and handling of waste.

We place a premium on developing effective technologies that are also safe for the environment. But when operating at the forefront of technology, there is always the possibility that a new technology has environmental impacts that were not assessed or foreseen to be harmful when originally implemented. We develop new technology using a robust technology maturation process. This enables us to systematically de-risk technical and commercial risks, while ensuring portfolio alignment with Shell's strategic ambitions and deployment commitments. While we believe we take reasonable precautions to limit these risks, we could be subject to additional remedial, environmental and litigation costs as a result of unknown and unforeseen impacts of operations on the environment.