Climate governance

Our climate governance begins with the Board’s approval of our energy transition strategy and oversight of its implementation and delivery. In 2021, the Board considered climate-related matters throughout the year when reviewing and guiding our energy transition strategy, assessing the risk management policies in place, and challenging and endorsing the business plans and budgets, including overseeing major capital expenditures, acquisitions and divestments. In 2021, the Board convened on 12 occasions and continued to regularly oversee the Powering Progress strategy and net-zero initiatives, including at the Board Strategy Day in June 2021.

An important part of Shell’s governance is to help manage our transition to a net-zero emissions energy business by 2050. We have further aligned remuneration with progress in the energy transition, by making changes to the annual bonus scorecard, which helps determine bonus outcomes for most Shell employees including Executive Committee members.

The progress in the energy transition measure, which makes up 15% of the annual bonus scorecard, had previously focused entirely on managing and reducing Shell’s operational emissions. We decided to widen this to take account of our success at selling lower-carbon products and working with our customers to advance decarbonisation.

As a result, from 2022, the energy transition measure will be split into three components, each accounting for 5% of the scorecard:

• selling low- and zero-carbon products; 
• reducing Shell’s operational emissions (our Scope 1 and 2 emissions); and
• partnering to decarbonise (to be measured in terms of our progress in rolling out our electric vehicle charging network). 

We also decided to introduce a customer excellence component in the operational excellence measure on the annual bonus scorecard. This is because our Powering Progress strategy places great emphasis on building strong customer relationships to help transform Shell in the energy transition. 

In 2019, we were the first major energy company to include an energy transition performance metric in our Long-term Incentive Plan for senior executives. This has vested for the first time at 180%, based on performance between 2019 and the end of 2021, reflecting our progress in transforming Shell’s business for a lower-carbon future. 

For further details of Shell’s governance structure, see the Shell Annual Report and Accounts 2021.