In 2018, sustainable development continued to account for 20% of Shell’s Executive scorecard, which is used to help determine the annual bonuses awarded to Royal Dutch Shell plc’s Executive Directors.
Targets are set each year by the Board’s Remuneration Committee, based on recommendations from the Corporate Social Responsibility Committee (CSRC), and the relevant outcomes are reported retrospectively in the Annual Report. The same annual bonus scorecard approach applies to senior executives and most other employees.
The metrics on sustainable development in 2018 had equal weighting between Shell’s safety (10%) and environmental (10%) performance. Since 2017, the environmental component has included greenhouse gas emissions management in specific business areas. The greenhouse gas emissions metrics in the 2018 scorecard evolved, with coverage increasing to around 90% of operated portfolio emissions. The refining metric remained unchanged, while the scope of the chemicals metric was adjusted to cover only steam cracker high value petrochemicals production. Emissions coverage in upstream and midstream was also revised, meaning that it is now measured on an intensity basis and has been expanded beyond flaring.
Scorecard measures for 2019 will remain the same.
Long-term incentive plan
In 2017, we were the first international oil and gas company to set an ambition to reduce the Net Carbon Footprint of the energy products we sell, taking into account their full life-cycle emissions, which include our customers' emissions associated with the energy products that we sell, in the period to 2050 in step with society as it moves toward the goals of Paris (see Net Carbon Footprint).
We took a big step forward in delivering our strategy in 2018 by announcing plans to link short-term targets to reduce the Net Carbon Footprint of the energy products we sell to executive remuneration.
We have accelerated our plans by including an energy transition condition in the performance conditions for the 2019 long-term incentive plan (LTIP) grant. This condition will include the first three-year target to reduce the Net Carbon Footprint of the energy products we sell and will also include other measures that will help us achieve our strategic ambitions in the long term, related to the growth of Shell’s power business, commercialising opportunities in advanced biofuel technology and the development of systems to capture and store carbon. These measures are based on recommendations from the CSRC.
The energy transition condition will apply to the Executive Directors, Executive Committee members and around 150 of Shell’s senior executives in 2019. From 2020, subject to any required staff consultation, we intend to incorporate the energy transition condition into the performance share awards made to around 16,000 employees globally.
Read more about the 2018 directors’ remuneration in the Annual Report.