- External Review Committee Chair
For the third successive year, Shell has invited an External Review Committee to assess the content of its Sustainability Report and the process through which it was produced.
This is our own assessment of Shell’s 2007 Sustainability Report. We express our views as individuals, not on behalf of our organisations.
what we did
We concentrated on three main questions:
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Has the company selected the most important topics for the report?
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How well has the report dealt with these topics and responded to stakeholder interest?
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Did Shell give us sufficient information and access to do our job effectively?
how we worked
In autumn 2007, we commented on Shell’s initial choice of issues to address in the report. We reviewed and commented on the report outline in late 2007, and successive report drafts in January and March 2008. The Committee met in person twice, and held several teleconferences. Our in-person meetings involved interviews with senior management, including the Chief Executive and the Board’s Social Responsibility Committee.
Our review is limited to the printed report. We welcome the report’s links to supplementary information published on the web, but have not reviewed this information. We did not verify the accuracy of data underlying the report. In addition to our comments on the company’s reporting, we have offered Shell our observations on its sustainability performance.
In recognition of our time and expertise, an honorarium was offered, payable to us individually or to a charitable organisation of our choosing. Shell reimbursed us for the expense of our travel and accommodation.
shell’s reporting
Shell’s 2007 report reflects a new level of leadership in sustainability reporting. Specifically, Shell has made clear how its strategy addresses the most important sustainability issues facing the company. It also explains in detail its stated intention to advocate public policies that support a sustainable energy future. This reflects its strategy to contribute to concerted action to meet the energy challenge.
The 2007 report effectively prioritises the issues that are most material to the company, and of greatest interest to Shell’s stakeholders, in addition to covering one of the most significant topics facing our world – climate change. In a short report, it will always be a challenge to provide sufficient depth on critical, complex issues. This year, because of the urgency of addressing climate change, we encouraged Shell to devote more space to explain its latest Strategic Energy Scenarios and advocacy efforts. Inevitably, due to space limits, other topics – such as local environmental impacts, Shell’s contributions to achievement of the Millennium Development Goals (including the link between energy and poverty reduction), and social performance in difficult operating environments – received less attention as a result. We therefore encourage Shell to use other tools such as its website to reinforce the coverage of all sustainability issues of importance to its stakeholders, and provide periodic updates as circumstances warrant, in between the annual reporting cycle.
Overall, Shell has been highly responsive to our comments on its reporting, both those made in the Committee’s letter last year and in the course of the process of developing this year’s report. Nevertheless, we refer again this year to the need for Shell to provide greater insight into its investment levels in renewable energy sources. The credibility of Shell’s advocacy efforts, on which it rightly focuses, will be greatly strengthened by providing this information.
the energy challenge
The 2007 report makes great strides in explaining Shell’s view of a sustainable energy future and its role in achieving it. We commend Shell for the description of its Strategic Energy Scenarios and their use to frame the dialogue on energy and climate change in the report. We welcome in particular Shell’s clear statement that it is now advocating the kind of policies and changes to the energy system described in the “Blueprints” scenario. We look forward to further reporting on these efforts in future years.
We also welcome the increased attention Shell pays in the Sustainable Transport section to managing energy demand. In particular, Shell takes a courageous step in highlighting its efforts to encourage customers to use less energy and its willingness to support stringent fuel economy standards.
We believe Shell can further strengthen its reporting on the energy challenge by providing additional information on:
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How its stated goal of achieving “top quartile performance” across the company will be measured and reported on in future.
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How the company’s performance on carbon emissions will be measured using the concept of top quartile performance once the company’s last absolute emission target expires in 2010. Without more detail about how it will be applied, it is not clear to us that this is a sufficiently ambitious target for an industry leader and whether this new benchmark will let readers see whether the company’s overall emissions are going up or down.
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The expected increase in CO2 emissions resulting from the company’s operations over the coming decade. This is especially critical in light of growing reliance on unconventional energy sources, such as oil sands, before carbon capture and storage technology is widely deployed.
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The extensive energy and water needed to develop Shell’s growing investment in its oil sands business.
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Its progress towards developing a significant capacity to capture and store CO2.
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Its progress towards developing a material commercial-scale alternative energy business, particularly in next generation biofuels.
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How and when reductions in gas flaring in Nigeria will be achieved, given that Shell successfully ended continuous gas flaring in the rest of its operations in 2007.
Working in difficult conditions
Shell’s 2007 report again acknowledges that Shell’s operations will occur increasingly in complex locations, where environmental and social conditions are often extremely challenging. We welcome Shell’s recognition that integrating sustainable development early in projects will be critical to operating successfully at these locations. In future, we would like to see Shell include more case studies from developing economies and provide additional information on how effectively it is integrating social and environmental considerations across all its operations.
Local development
Shell’s contributions to local development and procurement and its tax contributions indicate positive impacts but could be more comprehensively reported. The section on Local Development would be strengthened by including a discussion on the impact of Shell’s social investment spend.
Working in joint ventures
Shell describes well the distinction between joint ventures it does and does not control. We believe that Shell should not take an overly mechanical view of which projects it should report on. We would like Shell to report on operations, including those it may not fully control, that are significant for its reputation and raise substantive questions about how Shell’s Business Principles and social and environmental expectations are being upheld.
Conclusion
We applaud Shell for its serious approach to sustainability reporting and its commitment to contributing to a sustainable energy future. Shell’s serious and forthright report provides a strong basis for readers to assess its efforts to address issues of critical importance and makes an important contribution to the debate over energy and climate.
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