Climate governance

Our climate governance ensures our strategy, processes and incentives are aligned to drive our progress in the energy transition. In 2022, the Board continued to consider energy transition matters throughout the year when reviewing and guiding the implementation of our Powering Progress 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.

To foster the delivery of our strategy, we have further aligned staff 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. From 2022, we introduced new metrics to the measure called Shell’s Journey in the Energy Transition (15% of the annual bonus scorecard). These are:

• Selling lower carbon products – we help customers to reduce their emissions by supplying low-carbon products. We measure our success by the earnings share of our Marketing activities from low-carbon energy products as well as non-energy products and convenience retail.
• Reducing operational emissions – our target is to achieve a 50% reduction by 2030; and this measure is based on reducing our Scope 1 and 2 operational emissions.
• Partnering to decarbonise – we seek to collaborate with our customers to help them reduce their emissions. In 2022, we measured success in this area in terms of our progress in rolling out our electric vehicle charging network.

We also introduced a customer excellence measure on the annual bonus scorecard, to emphasise the importance of building ever stronger customer relationships in the energy transition. Our Long-term incentive plan (LTIP) and Performance share plan (PSP) tie pay for around 16,500 employees directly to achieving our strategic ambitions for the energy transition. From 2019 onwards, we have included an energy transition performance metric in our LTIP. This element vested for the second time in 2022, at 180% of target, based on performance between 2020 and the end of 2022, reflecting our progress in transforming Shell’s business for a lower-carbon future. The weight of this metric will be increased from 20% to 25% for the most senior employees for the upcoming LTIP cycle (2023-2025).

For further details see “Governance of climate-related risks and opportunities” in our Annual Report and Accounts 2022.