Faced with growing pressure from climate-focused lawsuits, energy giant Shell said in its newly released “Energy Transition Progress Report 2022” that litigation won’t help facilitate the transition of the world’s energy system to reach global climate goals.

The company also said that it does not plan to set interim Scope 3 emissions targets, which would include emissions from the use of its energy products, such as oil and gas, as this would hurt the company financially and not contribute to mitigating global warming.

The report follows a series of recent legal actions against Shell, including a lawsuit in the UK against the company’s board of directors announced last month by environmental law organization ClientEarth, arguing that the company’s “flawed” energy transition strategy puts shareholder value at risk, and asking the court to order the board to strengthen the company’s climate plans, as well as a complaint filed also last month to the SEC by advocacy group Global Witness accusing the company of greenwashing by misleading investors about the amount of investment it is directing towards renewable energy. 

In 2021, a case filed in a Dutch court resulted in an order for the company to slash emissions by 45% by 2030. In the ruling, the Dutch court judge said that Shell’s energy transition plan was “not concrete and is full of conditions.” Shell has appealed the decision, but said in its progress report that it is taking steps to comply with the ruling, and that its actions are consistent with the 2030 timeline.

Overall, Shell said that it is “involved in more than 20 such court cases worldwide.”

In the report, Shell said that it agrees that “there is an urgent need to change the world’s energy system,” adding that the company “is determined to play its part in helping to change the world’s energy system,” but argues that litigation does not facilitate the cooperation needed to effect the transition.

The company stated:

“We believe it is for governments to determine the right trade-offs for society and to put in place the policies that bring about fundamental changes in the way society consumes energy. Litigation does not enable the global cooperation required to change both supply and demand for energy, as well as the infrastructure supporting the use of energy.”

Scope 3 emissions, which accounts for the vast majority of energy companies’ carbon footprints, are a key focal point for some investor action, and for some of the litigation against the company. In the “Chair’s message” included in the report Shell Chairman Andrew Mackenzie said that “the Board has considered setting a Scope 3 absolute emissions target but has found it would be against the financial interests of our shareholders and would not help to mitigate global warming.”

Providing more detail later in the report, the company said that in order to implement a more ambitious Scope 3 target, the company would be required to reduce its sales of oil and gas products, and that in the absence of a change in customer demand, “would effectively mean handing over customers to competitors.”

The company added:

“This would materially affect Shell’s financial strength and limits its ability to generate value for shareholders. It would also reduce our ability to play an important role in the energy transition by working with customers to reduce their emissions.”

In 2020, Shell announced a commitment to achieve net zero in its operations by 2050, and in 2021, the company launched its “Powering Progress” strategy, detailing how it will achieve its target to be a net-zero energy business by 2050 across Scope 1, 2 and 3 emissions, with initiatives including investing in renewable and clean energy solutions.

The energy transition strategy was approved by shareholders in an advisory vote in 2021 with 89% supporting the plan. The following year, however, only 80% supported the progress report in implementing its transition strategy.

In the Chair’s message, Mackenzie said dialogue with shareholders indicated that some of the reasons for not supporting the 2021 progress included “societal pressure, potential media coverage, and expectations from investors in their funds.”

The company’s 2022 progress will be subject to an advisory vote at this year’s AGM, scheduled for May 23, and Shell said that investors will be able to vote on the strategy again in 2024.

Click here to access the 2022 progress report.

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