Sustainability Report 2018

Sustainability Report2018, Royal Dutch Shell plc

1INTRODUCTION04 About this report08 Our business strategy10 Our approach to sustainability

2RESPONSIBLE BUSINESS20 Human rights22 Safety27 Environment

3SUSTAINABLE ENERGY FUTURE44 Climate change and energy transition46 Net Carbon Footprint47 Managing greenhouse gas emissions52 Lower-carbon energy62 Developing technology

4CONTRIBUTION TO SOCIETY64 Working for Shell66 Revenue transparency and tax67 Social performance71 Working together

5OUR PERFORMANCE DATA80 About our data81 Environmental data82 Safety data82 Social data

SPECIAL REPORTS15 Innovating for India's energy

needs31 Producing shale oil and gas

responsibly38 Economic development in

Nigeria41 Spill response and prevention in

Nigeria54 Delivering natural gas in Canada73 Working for solutions in

Groningen

Contents

DigitalThe Sustainability Report is published in an onlineversion at reports.shell.com. The online version includesadditional information, such as an interactive GRI indexto enhance usability for the reader. In the event of anydiscrepancy between the online and hardcopy versions,the information contained in the online report prevails.This hardcopy version is provided for the reader’sconvenience only.

ScenariosThis report contains data and analyses from Shell’s newSky Scenario. Unlike Shell’s previously publishedMountains and Oceans exploratory scenarios, the SkyScenario is based on the assumption that societyreaches the Paris Agreement’s goal of holding the rise inglobal average temperatures this century to well belowtwo degrees Celsius (2°C) above pre-industrial levels.Unlike Shell’s Mountains and Oceans scenarios whichunfolded in an open-ended way based upon plausibleassumptions and quantifications, the Sky Scenario wasspecifically designed to reach the Paris Agreement’sgoal in a technically possible manner. These scenariosare a part of an ongoing process used in Shell for over40 years to challenge executives’ perspectives on thefuture business environment. They are designed tostretch management to consider even events that mayonly be remotely possible. Scenarios, therefore, are notintended to be predictions of likely future events or

outcomes and investors should not rely on them whenmaking an investment decision with regard to RoyalDutch Shell plc securities.

Additionally, it is important to note that Shell’s existingportfolio has been decades in development. While webelieve our portfolio is resilient under a wide range ofoutlooks, including the IEA’s 450 scenario (World EnergyOutlook 2016), it includes assets across a spectrum ofenergy intensities including some with above-averageintensity. While we seek to enhance our operations’average energy intensity through both the developmentof new projects and divestments, we have no immediateplans to move to a net-zero emissions portfolio over ourinvestment horizon of 10-20 years. Although we have noimmediate plans to move to a net-zero emissions portfolio,in November of 2017, we announced our ambition toreduce our Net Carbon Footprint in accordance withsociety’s implementation of the Paris Agreement’s goal ofholding global average temperature to well below 2°Cabove pre industrial levels. Accordingly, assuming societyaligns itself with the Paris Agreement’s goals, we aim toreduce our Net Carbon Footprint, which includes not onlyour direct and indirect carbon emissions, associated withproducing the energy products which we sell, but also ourcustomers’ emissions from their use of the energy productsthat we sell, by around 20% in 2035 and by around 50%in 2050.

https://reports.shell.com/

Welcome to Shell's Sustainability Report for 2018.

In my five years in this role I have worked to drive changefor Shell and the industry as a whole. Change that putsus in a strong position to help society meet increasingenergy demand while providing products with a lowercarbon footprint.

Yet one area remains consistently essential to the wayShell does business. That is sustainability. We continue toput three things at the heart of our approach.

First, we aim to run a safe, responsible and profitablebusiness. That means getting the basics right. One basicis doing no harm. For our industry, that means operatingsafely without hurting people or the environment.However, in 2018, there were two fatalities at Shelllocations – one person died at a refinery in Germanyand another at an onshore well in the USA. Every life lostis unacceptable. We must all work safely. In Nigeria, forexample, a country that presents complex operatingchallenges, Shell companies there have sometimesstruggled. In Groningen, in the Netherlands, we continueto work with others, including the government, to helppeople affected by earthquakes linked to our gasproduction activities. When we do not live up to thestandards society expects, we must learn and repair anyrelated damage.

We have also reflected deeply on the terrible roadtanker incident in Pakistan in 2017. The tragedy, whichwas outside the scope of Shell’s operational control,underscored the need to consider how we canencourage effective health and safety standards inoperations not under our control. Shell Pakistan Limited iscurrently contributing to long-term relief efforts for thefamilies affected. Sadly, in October 2018 there wasanother roll-over incident in Pakistan involving a customertanker, which resulted in the death of the relief driver anda spill. Events like these are a stark reminder that we mustnever forget the role that safety plays in our livesevery day.

Second, to deliver energy products that people needand want – and do this responsibly to help shape a moresustainable energy future. People rely on the energy weproduce to live their lives, in their homes and businesses,and for transport. We must be responsible stewards forthese energy products. This means taking action on thegreenhouse gas emissions associated with our energyproducts. Only by making relevant products responsiblycan we be in business sustainably.

Third, to make a positive contribution to society. Thismeans paying taxes, boosting local economies anddeveloping talent, as well as investing in education toinspire new generations of people with innovative ideas.It is an effort that also includes helping to achieveuniversal access to clean, affordable energy, one of theUN’s 17 sustainable development goals. Part of this effortis the ambition we announced in 2018: to provide areliable electricity supply to 100 million people in thedeveloping world by 2030. We continue to work ondeveloping a longer-term strategy to achievethis ambition.

This approach to sustainability provides the deepfoundations we need to support our business strategy: tobecome – and remain – a world-class investment, tothrive through the transition to lower-carbon energy andto maintain a strong societal licence to operate.

The 2018 Sustainability Report, our 22nd such report,shows real action in the three parts of our approach tosustainability. It also includes details of our social, safetyand environmental performance in 2018. Once again, Iam grateful for the valuable input of the independentReport Review Panel, who help us provide morebalanced, relevant and responsive reporting. As afounding member of the UN Global Compact, we alsocontinue to support its corporate governance principleson human rights, environmental protection, anti-corruptionand better labour practices.

This report shows much progress. But I believe we can dobetter. We must do the right thing on climate change,which means helping to reduce the environmental impactthat comes with making our energy products.

Letter from theCEO

01LETTER FROM THE CEOSHELL SUSTAINABILITY REPORT 2018

If society is to meet the aims of the Paris Agreement, thereis a lot of work to do to cut global greenhouse gasemissions while meeting rising demand for energy.

Shell’s ambition is to reduce the Net Carbon Footprint ofthe energy products we sell by around half by the middleof the century in step with society as it moves towardsmeeting the aims of Paris. We were the first internationaloil and gas company to set an ambition using a measurewhich includes our customers' emissions when they usethe energy products we sell, as well as emissions from ouroperations and supply chains that bring these products tomarket. This also includes those emissions generated bythird parties who supply energy and finished products tous. In 2018, we also announced we would set short-termNet Carbon Footprint targets. We linked a Net CarbonFootprint target and other measures to our executiveremuneration starting in 2019, one year earlier thanplanned. To achieve our 2050 ambition, we will adaptand evolve over time the range of products we offer inline with our customers’ needs, increase the lower andzero emission energy products we offer, including naturalgas, biofuels and renewable power.

We will also be working increasingly with nature, such asforests and wetlands, and progressing carbon captureand storage to create sinks for those emissions that arehard to avoid.

And we are working on making our own operations moreefficient. In our natural gas production and processing,this means limiting leaks of methane, a potent greenhousegas. To do this, in 2018 we launched a drive to improvethe data we gather on our own operational methaneleaks and set a methane intensity target. We are alsofinding better ways to detect and repair methane leaks inour operations.

The Net Carbon Footprint ambition will help ensure ourrelevance and resilience in the energy system of thefuture, which is crucial to being a world-class investmentover the long term.

In this report you will find details of the actions we aretaking to operate safely, to respect the environment andto work closely with communities. There is detail on ourdrive to build on our solid financial foundations guided byour business strategy, which will help us navigate throughall the change to come.

In a time of constant change, keeping sustainability as theconsistent bedrock of our approach to doing business isnot only right for society. It will be critically important toShell’s success.

Ben van BeurdenChief Executive Officer

02 LETTER FROM THE CEO SHELL SUSTAINABILITY REPORT 2018

IN THIS CHAPTER04 About this report08 Our business strategy10 Our approach to sustainability

IntroductionWelcome to the Shell Sustainability Report,which covers our social, safety andenvironmental performance in 2018 andsignificant events for Shell during the year.

TOPIC OVERVIEWThe 2018 Sustainability Report, published on April 2,2019, is our 22nd. It focuses on the key sustainabilitychallenges we face and the many ways we areresponding. It details our social, safety and environmentalperformance in 2018.

TOPIC SELECTIONThe topic selection process identifies the sustainabilitysubjects that were most relevant to Shell and ourstakeholders or were prominent globally in 2018.

Each year, we use a structured process to select thereport’s content and confirm its validity. We engage withvarious groups and individuals to understand specificconcerns about our business and its impact around theworld, particularly in relation to the environment andsociety. We consider, among others, the views of ourstakeholders such as non-governmental organisations,customers, the media, academics, investors andemployees across our business. We gather opinions andadvice in various ways including formal and informalmeetings, workshops and online surveys.

This report lists the topics that were a priority to Shell in2018. The topics that consistently ranked of higherimportance were energy transition and climate change,as well as business ethics, transparency andcorporate governance.

The main steps involved in selecting the topics are:

▪ identify and understand topics that are important toour stakeholders and our strategy;

▪ collate the topics identified as of high importance;▪ identify the topics that will be covered elsewhere on

www.shell.com;▪ consider input from our Report Review Panel to ensure

that coverage is balanced, relevant and complete; and▪ inform Shell’s Executive Committee of the chosen

topics, for their endorsement.

EXTERNAL VOICESSeveral individuals have shared their views on Shell’smore significant activities in sections of the report calledExternal voices. These quotes are intended to giveindependent perspectives on our activities. They comefrom a range of organisations in areas such as civilsociety, academia, contracting and supply, communityleadership, as well as from customers and people livingor working near our facilities. They also reflect someof the different regions where we operate and some ofour various businesses and projects. Contributors are notremunerated for their quotes.

REPORTING GUIDELINESWe report in line with guidelines developed by IPIECA,the global oil and gas industry association forenvironmental and social issues. This report has also beenprepared in accordance with the Global ReportingInitiative (GRI) Standards: Core option (see GRI index forfull details).

We used the recommendations of the Task Force onClimate-related Financial Disclosures (TCFD) to guideand inform our reporting in our Annual Report andSustainability Report, complemented by our Sky scenarioand the Shell Energy Transition Report. The TCFD was setup by the Financial Stability Board, an international body,and its recommendations call on companies to providegreater transparency about how they identify, assess andmanage climate-related risks and opportunities.

More detailed information about how we report isavailable at www.shell.com.

About thisreport

04 INTRODUCTION SHELL SUSTAINABILITY REPORT 2018

http://www.shell.com/

https://reports.shell.com/annual-report/2018/


Index to topics in this Sustainability Report

57Access to energy

58Biofuels

50Carbon capture and storage

44Climate change and energy transition

57Distributed and household energy

56Electricity

60E-mobility

61Energy-efficient products

47Greenhouse gas emissions

60Hydrogen

52Lower-carbon energy

48Methane emissions

53Natural gas

51Nature-based solutions

46Net Carbon Footprint

56Solar

62Technology

56Wind

8Business strategy

71Collaborations

78Divested ventures

11Embedding sustainability into projects

18Executive remuneration

20Human rights

65Living by our principles

78Non-operated ventures

13Performance highlights

66Revenue transparency and tax

10Sustainability at Shell

12UN sustainable development goals

54Canada

73Groningen, the Netherlands

15India

38Nigeria

31Shales

28Biodiversity and sensitive areas

33Decommissioning

36Energy efficiency

27Environment

76Environmental partners

81Environmental performance

34Flaring

37Non-greenhouse gas emissions

34Plastics

36Spills

33Waste

29Water

27Contractor safety

22Personal safety

27Preparing for emergencies

23Process safety

24Product stewardship

24Road safety

82Safety performance

21Security

21Cultural heritage

68Engaging with communities

21Indigenous peoples

21Involuntary resettlement

69Local content

64Our people

71Shell Foundation

69Skills development

70Social investment

75Social partners

82Social performance data

70STEM education

77Supply chain

ClimaClimate cte change and enerhange and energy tgy trransitionansition PPaagege

BusineBusiness ess etthicshics, t, trransansparparencency andy andccororporporaate gote govverernancenance

PPaagege

Special rSpecial reporeporttss PPaagege

EnEnvvirironmentonmental imal impacpacttss PPaagege

SSafeafettyy PPaagege

LLococal cal communitieommunities and socioecs and socioeconomic imonomic impacpacttss PPaagege

05INTRODUCTIONSHELL SUSTAINABILITY REPORT 2018

REPORT REVIEW PANELWe have used external review panels to strengthen oursustainability reporting since 2005. They help us evaluateand improve the quality and credibility of ourSustainability Report.

The 2018 Report Review Panel, previously calledthe External Review Committee, comprises fivesustainability and corporate reporting experts. Panelmembers are offered an honorarium for their time andexpertise. This year’s panel comprised:

▪ Faris Natour, Germany/USA. Director, Human Rights& Business Initiative, UC Berkeley Haas School ofBusiness, (Chair of the Report Review Panel)

▪ Andrew Logan, USA. Director, Oil and Gas, Ceres▪ Changhua Wu, China. Chief Executive Officer, Beijing

Future Innovation Center▪ Marie Morice, USA. Senior Advisor Sustainable

Finance, UN Global Compact▪ Mandy Kirby, UK. Chief Strategist, City Hive

You can read more about the panel memberson www.shell.com

The panel provided input as part of our content selectionprocess and reviewed the report in depth beforepreparing their statement focusing on the quality of thereport. The panel met to discuss Shell’s reporting,question Shell experts and prepare their statement.

The 2018 panel’s mandate focused on the quality –including the credibility, completeness and responsiveness– of Shell’s reporting.

Read below some of the feedback given in the 2017 report by the expert reviewers, and our response (see table).

2017 RECOMMENDATIONS AND OUR RESPONSES

2017 RECOMMENDATIONS HOW SHELL RESPONDED IN 2018

Strategic focus: Provide greater emphasis on theways in which Shell’s sustainability efforts strengthenits core businesses.

In the 2018 report, you can read more about ourapproach to sustainability – running a responsiblebusiness, shaping a sustainable energy future andmaking a positive contribution to society – explainedthrough more in-depth case studies on key businessdecisions (see Special reports). See also Ourbusiness strategy.

Detailed disclosure of social issues: Articulate morefully how Shell is contributing to the UN’s sustainabledevelopment goals (SDGs). Provide more clarity onthe interconnectedness between social andenvironmental issues. Provide more detail on diversityand inclusion.

Shell’s approach to the SDGs has been furtherrefined in 2018, with the focus now on the three goalswhere we believe we can make thelargest contribution.

Information about human rights has been expandedand includes more information on our approach todiversity and inclusion. We also showcase our effortsto encourage more women to study science,technology, engineering and mathematics. Shell’sgender balance is included in Our people andinformation is provided about our diversity andinclusion initiatives. We have also included moreabout our approach to social and environmentalaspects in some recent case studies (see Specialreports).

Water: Provide more information on Shell’s water useand approach to water management.

Information about water has been expanded. A newgraph and infographic have been added to thereport to show the use of recycled and fresh water,and case studies included to show watermanagement in practice (see Water use).

Focus areas: Provide fewer but more in-depth casestudies. Show greater alignment between the reportand Shell’s strategic priorities.

You can read new in-depth case studies in theSpecial reports section. We have also increasedlinks within the report to direct readers to relevantstrategic and commercial content, including onwww.shell.com.


https://www.shell.com/sustainability/sustainability-reporting-and-performance-data/external-review-committee.html


2017 RECOMMENDATIONSBalance: Provide more balanced content whichincludes challenging experiences andlessons learned.

HOW SHELL RESPONDED IN 2018Case studies and commentary have been carefullyappraised to provide balanced reporting and lessonslearned, with further content available onwww.shell.com.

Diversity of third-party comments: Diversify externalopinions to provide greater constructive criticism.

The number of external voices in the report has beenincreased to provide a more diverse range of views.

Commentary on performance: Include more contextand explanation for the performance data included inthe report.

You can find information on the factors that influenceour performance, including relevant graphs, within thesafety, environment and social performance sections.

Navigation: Improve navigation. The digital structure of the report has been updatedand menus enhanced to improve the visibility of keytopics. More links have been included to relevantcontent, both within the report and onwww.shell.com.

2018 RECOMMENDATIONS LETTER

REPORT REVIEW PANEL STATEMENTThe Report Review Panel issues the followingindependent statement on Shell's 2018Sustainability Report:

"We commend Shell on its continued commitment totransparency and progress on its most materialsustainability impacts. We have had the opportunityto review two drafts of the 2018 Sustainability Reportand provide feedback to Shell through conferencecalls and in writing. Shell has responded to ourquestions and suggestions. We have developed thisstatement independently following our review.

We appreciate the opportunity to provide feedbackand recommendations for further improving Shell’ssustainability reporting. In line with the scope of ourreview, our feedback focuses on the quality of Shell’ssustainability reporting rather than itssustainability performance.

We are pleased to see many of ourrecommendations on the 2017 Sustainability Reportreflected in this report. For example, Shell haselevated its disclosure on social issues with a morecomprehensive human rights section that bringstogether updates on its human rightspriorities. Similarly, Shell included more information onits approach to the UN's sustainable developmentgoals, although there remains an opportunity for thecompany to use the goals to more clearly framestrategic priorities, such as increasing access toelectricity and to connect related steps Shell is takingto meet its objectives. Independent comments fromexternal stakeholders throughout this report provide amore balanced view of Shell’s strengthsand challenges.

We are encouraged by the expanded informationabout Shell’s approach to managing water risk andwould like to see additional disclosure of targets andother measures Shell uses to minimise risks of adverseimpacts at the project level. The inclusion of Shell’sapproach to plastics in this report is equallyimportant. For the next report, we see an opportunityto discuss Shell’s role in addressing the globalchallenge of ocean plastics. We welcome Shell’scontinuing efforts to disclose its approach to publicpolicy issues as we see responsible engagement as akey sustainability priority for the energy sector.

Building on its experience and leadership insustainability reporting, we believe that for 2019,Shell has an opportunity for a transformative evolutionof its approach to sustainability reporting. While thewide range of topics covered in detail showsleadership in sustainability reporting, thiscomprehensiveness also presents challenges: forreaders to focus on content most relevant to them andfor the company to articulate its strategic prioritiesand the measurement of progress against them in themost effective way. In the future, Shell could focus onintegrating its strategic priorities under a clearlyarticulated sustainability strategy. This would alsoallow Shell to produce a more succinct report withthe opportunity for more in-depth discussions andprecise reporting on progress on strategic priorities.

We would like to thank Shell for the opportunity toshare our feedback here and throughout the draftingprocess and we look forward to the next evolution inShell’s sustainability reporting."




OIL

1.5%of the world's oil provided byShell

CUSTOMERS

30 millioncustomers served at our retail siteson average every day

CAPITAL INVESTED

$24.8 billionin 2018

NATURAL GAS

3%of the world's natural gasprovided by Shell

PRODUCTION

3.7 millionbarrels of crude oil equivalent aday in 2018

R&D

$986 millioninvested in research anddevelopment in 2018

BUSINESS STRATEGYShell’s purpose is to power progress together byproviding more and cleaner energy solutions. Ourstrategy is to strengthen our position as a leading energycompany by providing oil, gas and low-carbon energyas the world’s energy system transforms. Safety andsocial responsibility are fundamental to our businessapproach. Shell will only succeed by workingcollaboratively with customers, governments, businesspartners, investors and other stakeholders.

Our strategy is founded on our outlook for the energysector and the chance to grasp the opportunities arisingfrom the substantial changes in the world around us. Therising standard of living of a growing global population islikely to continue to drive demand for energy, includingoil and gas, for years to come. At the same time,technology changes and the need to tackle climatechange means there is a transition under way to a lower-carbon energy system with increasing customer choice.We recognise that the pace and specific pathforward are uncertain and so require agile decision-making.

STRATEGIC AMBITIONSAgainst this backdrop, we have the following strategicambitions to guide us in pursuing our purpose:

▪ to provide a world-class investment case. This involvesgrowing free cash flow and increasing returns, all builtupon a strong financial framework and resilientportfolio;

▪ to thrive in the energy transition by responding tosociety’s desire for more and cleaner, convenient andcompetitive energy; and

▪ to sustain a strong societal licence to operate andmake a positive contribution to society through ouractivities.

The execution of our strategy is founded on becoming amore customer-centric and simpler organisation, focusedon growing returns and free cash flow. By investing incompetitive projects, driving down costs and selling non-core businesses, we are continuously reshaping ourportfolio to become more resilient and focused.

Our ability to achieve our strategic ambitions dependson how we respond to competitive forces. Wecontinuously assess the external environment – themarkets as well as the underlying economic, political,social and environmental drivers that shape them – toevaluate changes in competitive forces and businessmodels. We use multiple future scenarios to assess theresilience of our strategy. We undertake regular reviewsof the markets we operate in and analyse trends anduncertainties, as well as our traditional and non-traditional competitors’ strengths and weaknesses, tounderstand our competitive position. We maintainbusiness strategies and plans that focus on actions andcapabilities to create and sustain competitive advantage.We maintain a risk management framework thatregularly assesses our response to, and risk appetite for,identified risk factors.

Our Executive Directors’ remuneration is linked to thesuccessful delivery of our strategy, based onperformance indicators that are aligned with shareholderinterests. Long-term incentives form the majority of theExecutive Directors’ remuneration for above-targetperformance. Our Long-term Incentive Plan includes cashgeneration, capital discipline and value createdfor shareholders.

For more details on our business strategy, see theBusiness overview section in our Annual Report.

Our businessstrategy


https://reports.shell.com/annual-report/2018/strategic-report/strategy-business-and-market-overview/business-overview.php

DELIVERING ON OUR STRATEGYWe refreshed our business strategy in 2016, not longafter completing the acquisition of BG, which addedsignificantly to our portfolio in liquefied natural gas(LNG) worldwide as well as deep-water oil and gasproduction in Brazil. As part of the strategy, we alsocreated a New Energies business to continue to exploreinvestment opportunities in areas including new fuels fortransport, such as advanced biofuels, hydrogen andcharging for battery-electric vehicles; and power,including from low-carbon sources such as wind andsolar, as well as natural gas. In 2017, we continued toreshape Shell as a world-class investment case that couldthrive in the energy transition with a strong licence tooperate; selling assets not central to our strategy such asour partial divestment of oil sands mines anddiscontinuing frontier exploration in Arctic waters, whilegrowing free cash flow and reducing debt.

We have continued to make progress in 2018 to delivera world-class investment. We must maintain our focusand build on the success of our divestment goals,reduction of net debt, the start of share buy-backs andthe growth in free cash flow.

During the same period, we continued to positionourselves as a leader among peers in the transition to alower-carbon future. We expanded our New Energiesbusiness and announced a methane emissions intensitytarget for our oil and gas assets. We worked with theTask Force on Climate-related Financial Disclosures (seeGreenhouse gas emissions) and set our ambition toreduce the Net Carbon Footprint of the energy productswe sell by around half by the middle of the century andin step with society as it moves towards meetingthe goals of the Paris Agreement.

In 2018, we committed to operationalise our ambition ofaround 50% Net Carbon Footprint reduction by 2050,through the setting of short-term targets linked toexecutive remuneration. This commitment was made in ajoint statement developed with institutional investors onbehalf of Climate Action 100+, an initiative led byinvestors with more than $32 trillion in assets undermanagement. Further, in early 2019, as part of ourtransparency efforts within remuneration, we havepublished our CEO Pay Ratio, in line with new legislation.Although this is not required until 2020, we were keen topublish this information early. For full details, please seeour Directors’ Remuneration Report in our Annual Report.

We maintained our focus on running a safe, responsibleand profitable business. For example, in 2018 weannounced our decision to build an LNG facility in BritishColumbia, Canada. The project was planned anddesigned by working closely with local communities, FirstNations and governments to ensure sustainabledevelopment was considered in every aspect of theproject. For example, the project has been designed toachieve the lowest carbon intensity of any LNG projectin operation today, partly aided by the useof hydropower.

Finally, we announced our ambition to provide a reliableelectricity supply to 100 million people in the developingworld by 2030 at the One Young World conference inThe Hague, the Netherlands (see Access to energy). Wecontinue to work on developing a longer-term strategy toachieve this ambition.

Shell business model

Retail

Liquefying gas by cooling (LNG)

Shipping and trading

Regasifying (LNG)

Supply and distribution

Developing fields

Producing oil and gas

Extracting bitumen

Exploring for oil and gas; offshore

Exploring for oil and gas; onshore

Lubricants Aviation Power

Refining oil into fuels and lubricants

Upgradingbitumen

Converting gas into liquid products (GTL)

Producingpetrochemicals

Producingbiofuels

Generatingpower

CustomersB2B & Retail

Sales and marketing

Transport and trading Development and extraction

Exploration

Manufacturing and Energy Production


https://reports.shell.com/annual-report/2018/governance/directors-remuneration-report.php

Sustainability at Shell means providing more andcleaner energy solutions in a responsible manner – in away that balances short- and long-term interests, andthat integrates economic, environmental and socialconsiderations into decision-making.

SUSTAINABILITY AT SHELLOur core values of honesty, integrity and respect forpeople – first laid out in the Shell General BusinessPrinciples more than 40 years ago – underpin ourapproach to sustainability. A commitment to contribute tosustainable development was added in 1997. Theseprinciples, together with our Code of Conduct, apply tothe way we do business and to our conduct with thecommunities where we operate. Since 1997, we haveworked to embed this commitment in our strategy, ourbusiness processes and decision-making. We have setclear ambitions, goals and targets that address our keysustainability challenges. Sustainability is core toour project planning and operational activities.

OUR APPROACHSustainability at Shell means providing more and cleanerenergy solutions in a responsible manner – in a way thatbalances short- and long-term interests, and thatintegrates economic, environmental and socialconsiderations into decision-making.

Sustainability is integrated across our business onthree levels:

▪ in Shell company operations – by running a safe,efficient, responsible and profitable business

▪ for our customers – by helping to shape a moresustainable energy future; and

▪ with communities and wider society – by sharingbenefits where we operate and making a positivecontribution.

RRunning a sunning a safeafe, e, efficientfficient, r, reessponsible and prponsible and profitofitableablebusinebusinessssThis is the foundation of our approach. We strive toproduce and deliver energy responsibly – in a way thatrespects people, their safety and their environment. At thesimplest level, this means doing no harm. We applyglobal standards to manage safety, the environment andhow we engage with communities and we work tocontinuously improve our performance.

A Shell community liaison officer meets a landowner near a wellsite at our unconventional project in Appalachia, USA.

Helping tHelping to shape a moro shape a more suse susttainable enerainable energy fgy futurutureeWe provide products that people need and want toimprove their lives – in their homes and businesses, andfor transport. We aim to be responsible stewards forthese products. We intend to adapt, innovate and playour part in the global shift to provide more and cleanerenergy solutions for all in a sustainable future. This meanstransforming our product mix over time. We are takingaction on the greenhouse gas emissions associated withour products. We aim to cut the Net Carbon Footprintof the energy products we sell by around half by 2050,in step with society’s progress to align with the goals ofthe Paris Agreement.

MakMaking a positiving a positive ce contontrribution tibution to socieo societtyyWe aim to play a positive role in communities where weoperate and in wider society. We contribute to thedevelopment of local economies by creating jobs,boosting skills, sourcing from local suppliers, as well aspaying taxes and royalties. We support communityprojects that are based on the needs of localcommunities. Our ambition that, by 2030, we will beproviding a reliable electricity supply to 100 millionpeople in the developing world who do not have thistoday is also designed to bring wider benefits. Wecontinue to work on developing a longer-term strategy toachieve this ambition.

We aim to deliver energy products that people need and want –and do this responsibly to help shape a more sustainableenergy future.

SUPPORT FOR INTERNATIONAL AGREEMENTSWe welcome the UN’s sustainable development goals,which seek to tackle the world’s economic, social andenvironmental challenges by 2030, and aim to play ourpart in helping governments and society to achieve them(see Sustainable development goals).

We respect human rights as set out in the UN UniversalDeclaration of Human Rights and the InternationalLabour Organization’s core conventions. We alsosupport a number of external voluntary codes thatpromote responsible business practices.

We support the UN Paris Agreement on climate change,which aims to limit the rise in global averagetemperatures this century to well below two degreesCelsius above pre-industrial levels.

Our approachto sustainability


EMBEDDING SUSTAINABILITY INTOPROJECTSOur commitment to safety, the environment andcommunities plays an important role in how we plan,design and operate our projects and facilities. Weconduct detailed environmental, social and health impactassessments for every major project.

An environmental adviser to Shell Bolivia takes measurements froma river with the help of three community coordinators at the JaguarCamp. Shell is running an exploration project nearby to find naturalgas in a remote and mountainous community.

When we invest in projects, we aim to balance the short-and long-term interests of our business. For investmentdecisions, we consider the economic, social, ethical andenvironmental risks and opportunities as well as thepolitical and technical risks. The LNG Canada jointventure and Shell Canada's Groundbirch asset in BritishColumbia are examples of how we embed sustainabilityin our projects (see Delivering natural gas in Canada).

Managing risks to people and the environment isessential to delivering a successful project. The mandatoryrequirements in our Health, Safety, Security, Environmentand Social Performance (HSSE&SP) Control Frameworkhelp to ensure our projects and assets are safe.

As part of the HSSE&SP Control Framework, we requireprojects and assets that produce more than 50,000tonnes of greenhouse gases per year to have agreenhouse gas and energy management plan in place(see Energy efficiency in our operations). For projects, ourplanning process helps to guide our decisions on whichtechnology to use, including whether carbon capture andstorage should be considered, and whether to moveahead with the project.

For example, applying the framework at our Gorek gasplatform in Malaysia highlighted that solar panels couldbe used as one source for the power supply. At ourPearl gas-to-liquids plant in Qatar, we are using a fuel by-product of the process to power the plant. This fuel hadpreviously been flared, or burned off. Using it in this wayhas helped reduce our overall emissions by 550,000tonnes of CO2 on a yearly basis.

We engage with communities and other stakeholders aspart of our impact assessment process to explain theproject, consider suggestions and discuss possible waysto address any concerns. In addition to complying withrelevant social and environmental regulations and alignwith international standards, including those from theWorld Bank and its International Finance Corporation,seeking community input helps us to improveproject design.

We train our project teams to understand how to useimpact assessments to embed sustainability into projects.Project teams are supported by specialists in areas suchas biodiversity, waste, air, energy and watermanagement, as well as indigenous peoples’ rights,cultural heritage and resettlement.

A guide to sustainability across the life of a project

Identify and assess

Select Define Execute Operate Decommission and restore

Identify people who may be interested in or affected by the project

Engage with stakeholders (e.g. communities, host governments and NGOs) and feed responses into our risk analyses and decision-making process

Conduct baseline studies of the local environment (e.g. water, biodiversi-ty, social livelihoods) and consider how the project may affect it

Based on assessment of potential impacts and stakeholder engagement, identify mitigation and enhancement measures

Implement a mitigation plan for project development, construction and operation


UN SUSTAINABLE DEVELOPMENT GOALSThe UN’s 17 sustainable development goals (SDGs)seek to address the world’s biggest challenges, includingending poverty, improving health and education, makingcities sustainable and tackling climate change.

Governments are responsible for prioritising andimplementing approaches that meet the SDGs, andmany have started to articulate plans to meet the goals.But achieving these tasks will require unprecedentedcollaboration and collective action with business andcivil society.

We welcome the SDGs and believe we have animportant role to play in supporting the ambitions.

All the SDGs are relevant to Shell operations to varyingdegrees and we are already contributing to many ofthese goals. In 2018, following a review by seniorexecutives, we decided to focus on supporting the threegoals where we can make the greatest contribution:Goal 7 (Ensure access to affordable, reliable, sustainableand modern energy), Goal 8 (Decent work andeconomic growth) and Goal 13 (Climate action).

Today, around 1 billion people live without access toelectricity. The same number live with unreliable or unsafesupplies of electricity. Access to reliable and safe energyis critical to enabling economic and social developmentand improving health, education and livelihoods. Goal 7is crucial to achieving almost all the SDGs. For our part,we announced our ambition to provide a reliableelectricity supply to 100 million people in the developingworld by 2030. We continue to work on developing alonger-term strategy to achieve this ambition.

Read more in the report and on shell.com:

▪ Climate change and energy transition▪ Access to energy▪ Energy-efficient products▪ New Energies▪ Local content and skills development▪ Shell LiveWIRE (see www.shell.com/shell-livewire)

GGoal 7 - Ensuroal 7 - Ensure ace accecess tss to afo affforordabledable,,rreliableeliable, sus, susttainable and moderainable and modernnenerenergygy

Employment is a critical route out of poverty and towardsprosperity. We provide jobs and follow applicablelabour, health and safety standards. We encouragelocal businesses to be part of our supply chain, and seekto ensure our suppliers meet Shell standards. We workwith governments and others to offer training to buildlocal skills and expertise. We support entrepreneursthrough various programmes, including the ShellLiveWIRE programme, which helps young people starttheir own businesses. We also contribute to economicgrowth by paying taxes and royalties tolocal governments.


▪ Our people▪ Social performance▪ Supply chain including worker welfare▪ Safety▪ Revenue transparency and tax▪ Shell LiveWIRE (see www.shell.com/shell-livewire)

GGoal 8 - Doal 8 - Decent wecent worork and eck and economiconomicggrroowwtthh

We have an ambition to reduce the Net CarbonFootprint of the energy products we sell by around halfby 2050, in step with society, towards meeting the goalsof the Paris Agreement to keep the rise in global averagetemperatures to well below two degrees Celsius abovepre-industrial levels. As an interim step, by 2035, andbased on societal progress, we aim for a reduction ofaround 20% compared with 2016 levels. Our approachto calculating the Net Carbon Footprint covers emissionsdirectly from Shell operations (including from theextraction, transport and processing of raw materials,and transportation of products), those generated by thirdparties who supply energy to us for production, and ourcustomers' emissions from their use of ourenergy products.


▪ Climate change and energy transition▪ Managing greenhouse gas emissions▪ Advancing lower carbon options▪ Shell Scenarios (see www.shell.com/scenarios)▪ Shell Energy Transition Report (see www.shell.com/

set)▪ Climate change: an imperative to act (see

www.shell.com/inside-energy)

GGoal 13 - Climaoal 13 - Climate acte actiontion


https://www.shell.com/shell-livewire

https://www.shell.com/shell-livewire

https://www.shell.com/scenarios

https://www.shell.com/energy-and-innovation/the-energy-future/shell-energy-transition-report.html

https://www.shell.com/energy-and-innovation/the-energy-future/shell-energy-transition-report.html

https://www.shell.com/inside-energy/ipcc-climate-report-jiang-kejun.html

PERFORMANCE HIGHLIGHTSThis table represents a selection of global metrics that wetrack within Shell. These metrics have been selectedbecause they reflect the direct impact of Shellcompanies’ operations on people and the environment.We used them to set our goals and measure progress in2018 and to define priorities for 2019.

We review our metrics regularly to ensure we capture theinformation needed to improve our performance. Forexample, we introduced Goal Zero for personal safety atShell in 2007. Since then, we have broadened the goalto aim for no harm to people and the environment. Moreinformation on our performance, definitions of theindicators and the referenced goals are provided in theenvironmental, social and safety data sections.

Goals, performance and plans for 2018 and beyond

GGoal 2018oal 2018

TRCF ≤ 0.7Achieve total recordable case frequency (TRCF) –the number of injuries per million working hours – of0.7 or below for employees and contractors.Goal Zero has been our ambition for personalsafety since 2007.

PrProoggrreess in 2018ss in 2018

Total recordable case frequency (TRCF)

2

1

0

1.0 0.9 1.0 0.90.8

2014 2015 2016 2017 2018

The TRCF increased slightly to 0.9 comparedwith 0.8 in 2017, which was our lowestever performance (see Safety performance).

PrPriorioritieities in 2019s in 2019

▪ Continue to focus on our three safety themesof care, dilemmas and risk normalisation inengagements with employees andcontractors.

▪ In road safety, continue to focus on effectiveimplementation of proven practices across alllines of business, with an emphasis onimproving management of fuel transport inhigh-risk countries.

▪ Support the development andimplementation of common industry safetystandards.

▪ Improve our capabilities to learn from auditfindings and investigations into incidents withthe potential to cause harm.

PERS

ON

AL S

AFET

Y

Leaks ≤ 125Reduce the number of operational leaks to 125 orbelow (classified as “operational Tier 1 & 2 processsafety events”).Since 2011, we have extended our ambition ofGoal Zero to process safety.From 2017, we combined operational Tier 1 & 2safety events when setting the target. Previously, weonly used Tier 1 events.

Number of operational process safety Tier 1 and2 events

400

200

0

251 220146 121

167

2014 2015 2016 2017 2018

The number of Tier 1 and 2 operational processsafety events fell from 166 in 2017 to 121 in 2018(see Safety performance).

▪ Continue to focus on asset integrity andquality of operational execution by, amongother things, embedding our Process SafetyFundamentals and the roll out of a group-wide asset management system.

▪ Continue to improve learning from processsafety events with high potential impact.

PRO

CES

S SA

FETY

Goal Zero extends to the environment with ourgoal of no operational spills.

Volume of operational spills in ‘000 tonnes

1.0

0.5

0

0.70.8 0.8 0.8

0.4

2014 2015 2016 2017 2018

The number of operational spills fell from 104 in2017 to 92 in 2018. The volume of operationalspills of oil and oil products in 2018 was 0.8thousand tonnes, an increase from 0.4 thousandtonnes in 2017 (see Environmental performance).

▪ Continue to learn from incidents with spills toimprove the reliability of our facilities andfurther reduce the number and volume ofoperational spills.

▪ Continue to work with the oil and gasindustry to further develop effective oil-spillresponse capacities.

ENVI

RON

MEN

T


Reduce flaring in our upstream business.Our policy is to reduce flaring and venting to as lowa level as is reasonably practical.We are a signatory of the World Bank’s ZeroRoutine Flaring by 2030 initiative.

Upstream flaring in million tonnes CO2equivalent [A]

20

10

0

13.0 11.87.6

5.28.2

2014 2015 2016 2017 2018

[A] Includes Upstream and Integrated Gas

Our upstream flaring decreased to 5.2 milliontonnes of CO2 equivalent in 2018 from 8.2million tonnes in 2017 (see Flaring).

▪ Continue to link staff bonuses to themanagement of greenhouse gas emissions.

▪ Further embedding the guiding principles forreducing methane emissions across thenatural gas value chain, which Shell andseven other energy companies signed inNovember 2017.

▪ Continue to focus on maintenance measuresto enhance the reliability of our equipmentand reduce emissions through leaks.

Upstream and Integrated Gas GHGintensity ≤ 0.164For our Upstream and Integrated Gas facilities,achieve a GHG intensity of 0.164 tonnes orbelow of CO2 equivalent per tonne of hydrocarbonproduction available for sale.

Upstream and Integrated Gas: tonnes CO2e pertonne of hydrocarbon production available forsale

0.2

0.1

0

0.166 0.1580.166

2014 2015 2016 2017 2018

Our Upstream and Integrated Gas intensity was0.158 tonnes CO2 equivalent per tonne ofhydrocarbon production available for sale in2018 compared to 0.166 in 2017.G

HG

AN

D EN

ERG

Y

Refinery GHG intensity ≤ 1.05For our refineries, reduce GHG intensity to 1.05tonnes or below of CO2 equivalent per Solomon’sUtilised Equivalent Destillation Capacity [UEDC]

Refineries: tonnes CO2e per Solomon’s UtilisedEquivalent Distillation Capacity [UEDC]

2

1

0

1.16 1.18 1.051.14

2014 2015 2016 2017 2018

Refinery GHG intensity in 2018 was 1.05 tonnesCO2e per UEDC compared to 1.14 in 2017.

Chemical GHG intensity ≤ 0.97For our chemical plants, reduce GHG intensity to0.97 tonnes or below of CO2 equivalent per tonneof high-value petrochemicals produced.

Chemicals: tonnes CO2e per tonne ofpetrochemicals produced

2

1

0

1.04 0.99 0.960.95

2014 2015 2016 2017 2018

Chemical GHG intensity was 0.96 tonnes CO2equivalent per tonne of high value chemicalsproduced in 2018 compared to 0.95 in 2017.

Effective community feedback.Our community feedback mechanism (CFM) hasbeen used to address community concerns since2012. We continue to progress the implementationof our standard online community feedback tool,which helps to strengthen tracking and reportingof concerns.

We conducted a full evaluation of our onlinecommunity feedback tool to understand how ithas been used across our projects and facilities.Following the evaluation, we identified a numberof areas for improvement, which are now beingconsidered to enhance the tool.We developed the CFM self-check to assess theeffectiveness of the mechanism forimplementation in all major facilities and projects.The check is based on UN Guiding Principlesand Human Rights criteria.(see Social performance).

▪ Enhance the online community feedbacktool, based on the improvement areas weidentified in 2018, such as user friendliness toensure short response times. Theimprovements help to ensure we are able toeffectively receive, assess and support assetsand projects to respond quickly to concerns.

▪ Identify further improvement opportunitiesfrom the self-check exercise for an effectiveimplementation of CFM.

SOC

IAL P

ERFO

RMAN

CE


2018 was Shell’s 25th anniversary in India since our re-entry into the country in 1993. Our links with India goback much further – to 1928. Today, Shell sees India asan important growth market, as a hub for innovation anda source of world-class talent.

We are working with our partners to deliver more andcleaner energy solutions – in a way that integratesenvironmental and social considerations – as India’spopulation grows and living standards rise. We plan tosignificantly expand in the country by offering customersa range of more energy-efficient, lower emission fuelsand lubricants, natural gas and renewable energy forpower generation and biofuels.

The country has a series of goals for both changing thekinds of energy it uses and increasing energy access torural communities. For instance, the government has setseveral targets, including increasing the share of naturalgas in the primary energy mix from 6.5% today to 15%in 2030.

The Hazira LNG port and terminal in Gujarat – whichShell Gas B.V. acquired in early 2019 – is one of thelargest ever international investments in India’s energysector. Plans are also under way to expand the numberof Shell retail sites in India.

A ship delivers a cargo of liquefied natural gas to the Haziraregasification facility.

Innovating forIndia's energyneeds

A natural gas tank at the Hazira facility.


The Shell Technology Centre in Bangalore is one ofShell’s three major innovation hubs, alongside similarcentres in Amsterdam, the Netherlands and Houston,USA. The centre conducts research into bitumen,subsurface modelling, enhanced computational research,chemicals and advanced catalysts. Scientists andengineers also work on international projects, includingmany aspects of our Prelude floating liquefied naturalgas facility.

The engineering team also developed computermodelling to help us understand how the Malikaiplatform in Malaysia would perform in the fast-flowingcurrents of the South China Sea – helping to keepworkers safe.

Scientists and engineers work on international projects at ShellTechnology Centre Bangalore

The technology centre conducts vital research into lower-carbon biofuels. Shell is keen to invest in developing anddeploying technologies like IH2, which converts biomass– wood, agricultural residues or algae, for example –into fuel that significantly reduces greenhouse gasemissions. We have opened a demonstration plant inBangalore that can process up to five tonnes offeedstock a day – a big step towards scaling up IH2

technology for commercial use.

We recently invested in Husk Power Systems, a leadingmini-grid company operating in India, that uses solar andbiomass to provide reliable and affordable electricity tosome of the several million people in India without it. Wealso acquired a 49% interest in Cleantech Solar, whichprovides solar power to commercial and industrialcustomers across South East Asia and India.

We also encourage the deployment of innovative energysolutions at our own facilities. At our technology centre inBangalore, we aim to achieve a net-zero emissionsfootprint. For instance, we have set up a contract topurchase solar electricity from an offsite developer,delivered through the grid for use in our technologycentre. This programme is being rolled out across otherShell India sites as well.

A RESPONSIBLE PARTNERAround the world, we work with local partners to help usunderstand and address the needs of the communitieswhere we operate. In India, we are involved in severallocal community initiatives, including promoting science,technology, engineering and maths (STEM) educationand improving road safety, as well as integrating socialinvestment into our core business.

In 2018, we launched NXplorers, a programme toencourage young innovative minds to pursue STEMeducation and strengthen India’s intellectual capital. Theprogramme was rolled out across four states in India in2018 and aims to reach 3,000 schools and 260,000students by 2020.

We also worked with the Transport Ministry on a roadsafety awareness campaign to influence young adultsthrough social media. We have reached more than 6million millennials across the 10 most accident-pronecities in the country.

Exposure to smoke from traditional cookstoves and openfires causes around 783,000 deaths in India each year,according to the Clean Cooking Alliance. We areworking together with the Alliance to provide access toand generate demand for clean cooking solutions,including launching a campaign to educate ruralpopulations about the potential health benefits.

In 2018, Shell commissioned a pre-production prototypeof the world’s first flat-pack truck, the OX. We areshowcasing this truck in India, including how it can bringlow-cost all-terrain mobility to rural communities. Limitedmobility in hard-to-reach communities in developingeconomies can restrict access to basic services. The OXtruck has the potential to broaden access to transportpossibilities with many resulting benefits. Read more atwww.shell.in/ox.

As a part of its business activities, Shell India Lubricantshas provided health camps for more than 30,000 truckdrivers and mechanics, while the retail team hassupported hiring people with disabilities at Shell retailsites. Shell India also has numerous other communityoutreach programmes through its service centres andjoint ventures, and has recently launched an employeevolunteer programme.


http://www.shell.in/energy-and-innovation/make-the-future/ox-in-india

SUSTAINABILITY GOVERNANCECORPORATE AND SOCIAL RESPONSIBILITYCOMMITTEEThe Corporate and Social Responsibility Committee(CSRC) is one of four standing committees of the Boardof Royal Dutch Shell plc. The committee's role is to reviewand advise on our strategy, policies and performanceagainst the Shell General Business Principles, our Codeof Conduct and our Health, Safety, Security, Environmentand Social Performance (HSSE&SP) standards.

The CSRC meets regularly to review and discuss a widerange of sustainability-related topics, including oursustainability performance and the results of audits. Thecommittee advises the Remuneration Committee on thesustainable development metrics that apply to theExecutive Committee scorecard. The CSRC also reviewsmajor issues of public concern and Shell's strategy toaddress them.

The committee is assisted and advised by ExecutiveCommittee member Harry Brekelmans, with a seniormanager acting as secretary to the CSRC. The Chair ofthe Board, the CEO and senior managers regularlyattend CSRC meetings to discuss specific topics.

CSRC priorities

Cultureand Conduct

Ethics

Saf

et

y

Environment

In 2018, the CSRC balanced its time between safety,environment and ethics, with a strong focus throughout oncorporate culture and conduct. The topics discussed indepth included personal and process safety, road safety,the energy transition and climate change, Shell’s NetCarbon Footprint, the company’s environmental andsocietal licence to operate, and its ethics programme.The CSRC also discussed Shell companies’ operationsand the challenges faced in Pakistan, Nigeria and theNetherlands. In 2018, the committee held five meetingsin person and two meetings by conference call.

The CSRC conducted two major site visits in 2018. InFebruary, the committee visited Nigeria, where overthree days it met with Shell staff, government officials,and representatives from local non-governmentalorganisations to gain a deeper understanding ofoperations in the Niger Delta. In December, thecommittee spent a day visiting the Moerdijk facility in theNetherlands, where they discussed process safetyperformance and local site challenges, including Shell'srelationship with the local community.

COMMITTEE VOICE

“As the CSRC, we examined many aspects ofsustainability across safety, environment and ethics in2018. Our agenda was focused on the topics of moststrategic importance to Shell. We have full access tothe senior managers responsible for all aspects ofsustainability. We probe and raise challengingquestions, drawing on our collective experience, andprovide feedback to the company’s management.During site visits, when we see Shell’s operations first-hand, we talk with local management, front-line staffand a wide range of stakeholders to gain a sense ofhow Shell’s standards are being applied in practice.”

Sir Nigel SheinwaldCSRC Chair

The CSRC conducted a site visit to Gbaran-Ubie, animportant project in Nigeria’s Niger Delta region, to gain a deeperunderstanding of its operations.

The CSRC plays an important role in helping to ensure thatShell has effective sustainability governance structures inplace throughout the company, along with performancestandards and other controls. These help the company tomanage risks and opportunities, and shape decisions andactions across all Shell businesses.

In 2018, the members of the committee were:▪ Hans Wijers – Chair since May 2015 and stood down

as Non-Executive Director in May 2018;▪ Sir Nigel Sheinwald – Member since July 2012 and

Chair since May 2018;▪ Catherine Hughes – Member since November 2017;

and▪ Linda G. Stuntz – Member since May 2018.

For further details on the Corporate and SocialResponsibility Committee and how sustainability ismanaged at Shell see www.shell.com and our AnnualReport.



https://reports.shell.com/annual-report/2018


EXECUTIVE REMUNERATIONANNUAL BONUSIn 2018, sustainable development continued to accountfor 20% of Shell’s Executive scorecard, which is used tohelp determine the annual bonuses awarded to RoyalDutch Shell plc’s Executive Directors.

Targets are set each year by the Board’s RemunerationCommittee, based on recommendations from theCorporate Social Responsibility Committee (CSRC), andthe relevant outcomes are reported retrospectively in theAnnual Report. The same annual bonus scorecardapproach applies to senior executives and mostother employees.

The metrics on sustainable development in 2018 hadequal weighting between Shell’s safety (10%) andenvironmental (10%) performance. Since 2017, theenvironmental component has included greenhouse gasemissions management in specific business areas. Thegreenhouse gas emissions metrics in the 2018 scorecardevolved, with coverage increasing to around 90% ofoperated portfolio emissions. The refining metricremained unchanged, while the scope of the chemicalsmetric was adjusted to cover only steam cracker highvalue petrochemicals production. Emissions coverage inupstream and midstream was also revised, meaning thatit is now measured on an intensity basis and has beenexpanded beyond flaring.

Scorecard measures for 2019 will remain the same.

LONG-TERM INCENTIVE PLANIn 2017, we were the first international oil and gascompany to set an ambition to reduce the Net CarbonFootprint of the energy products we sell, taking intoaccount their full life-cycle emissions, which include ourcustomers' emissions associated with the energy productsthat we sell, in the period to 2050 in step with societyas it moves toward the goals of Paris (see Net CarbonFootprint).

We took a big step forward in delivering our strategy in2018 by announcing plans to link short-term targets toreduce the Net Carbon Footprint of the energy productswe sell to executive remuneration.

We have accelerated our plans by including an energytransition condition in the performance conditions for the2019 long-term incentive plan (LTIP) grant. This conditionwill include the first three-year target to reduce the NetCarbon Footprint of the energy products we sell and willalso include other measures that will help us achieve ourstrategic ambitions in the long term, related to the growthof Shell’s power business, commercialising opportunitiesin advanced biofuel technology and the development ofsystems to capture and store carbon. These measures arebased on recommendations from the CSRC.

The energy transition condition will apply to the ExecutiveDirectors, Executive Committee members and around150 of Shell’s senior executives in 2019. From 2020,subject to any required staff consultation, we intend toincorporate the energy transition condition into theperformance share awards made to around 16,000employees globally.

Long-term incentive plan%

a

b

c

22.5%

22.5%

22.5%

22.5%

10.0%

a

b

de

Total shareholder return (TSR)

c Return on average capital employee growth (ROACE)

Comparative measures 67.5%Absolute measures 32.5%

Cash flow from operating activities growth (CFFO)

Free cash flow (FCF)Energy transition

d

e

Read more about the 2018 directors’ remuneration in theAnnual Report.

Scorecard structure

50%

30%

20%

10%Environment

Safety

10%

Sustainable development

Sustainable development Operational excellence Cash flow from operating activities

12.5%Refinery and chemical plant availability

12.5%Project delivery

12.5%Production

12.5%LNG liquefaction volumes

Operational excellence

2018 2018

Personal safety 5%

Process safety 5%

Refining GHG intensity 4%

Chemicals GHG intensity 2%

Upstream/Integrated Gas greenhouse gas intensity

4%



https://reports.shell.com/annual-report/2018/governance/directors-remuneration-report.php

IN THIS CHAPTER20 Human rights22 Safety27 Environment38 Economic development in Nigeria41 Spill response and prevention in Nigeria

ResponsiblebusinessWe work to reduce our environmental impactand manage our operations safely andresponsibly. Safety and respect for people– our employees, contractors and neighbours– are fundamental to how we do business.

RESPECTING HUMAN RIGHTSWe recognise our responsibility to respect human rights inall aspects of doing business. We focus on four areaswhere human rights are critical to the way we operate:communities, security, labour rights and supply chains.

Our approach applies to all our employees andcontractors and is informed by the Universal Declarationof Human Rights, the core conventions of the InternationalLabour Organization, and the United Nations GuidingPrinciples on Business and Human Rights. Our approachis set out in our Shell General Business Principles, Codeof Conduct, and Shell Supplier Principles.

We have embedded human rights into our existingframeworks and processes to demonstrate we respecthuman rights across the business.

Our Health, Safety, Security, Environment and SocialPerformance (HSSE&SP) Control Framework sets out howwe identify, assess and manage our impacts oncommunities where we operate - including any impact onhuman rights - and how we engage respectfully with ourneighbours. Our goal is to keep employees, contractorsand facilities safe, while respecting the human rights oflocal communities in accordance with the UN VoluntaryPrinciples on Security and Human Rights.

The Shell Supplier Principles include specific expectationsfor contractors and suppliers covering business integrity,health and safety, social performance, and labour andhuman rights. Our joint venture partners are expected toimplement our control framework or an equivalent (seeNon-operated ventures).

We have made several external regulatory declarationsthat describe how we manage human rights risks in oursupply chains. We expect our contractors and suppliersto obey the national laws and international standardsthat require them to treat workers fairly, and to provide asafe and healthy work environment.

In 2018, we joined forces with our industry peers tocreate a Common Framework for Supplier Labour RightsAssessment. The initiative is designed to make it easier for

suppliers to demonstrate how they respect human rightsand care for people; this transparency is intended toimprove working conditions in our companies’supply chains.

We have community feedback mechanisms at all ourmajor facilities. These mechanisms, along with a globalhelpline operated by an independent provider, enableemployees, people in the communities where weoperate, contractors and any third party to raiseconcerns, so they can be resolved.

We also consult with international organisations,companies and civil society to understand and respondto current and emerging human rights issues relevant toour business. These include the global oil and gasindustry association for environmental and social issuesIPIECA, and the human rights working group of Businessfor Social Responsibility.

Read more on our approach to human rights atwww.shell.com/humanrights and our external regulatorydeclarations at www.shell.com/external-voluntary-codes.

MANAGING OUR IMPACT ON PEOPLEOur projects and operations can affect our neighbours.Our social performance team, working withenvironmental specialists, assesses and manages theimpact of Shell’s business to ensure that work is carriedout in a responsible way.

We manage the impact we may have on people livingnear our operations in line with the International FinanceCorporation’s Performance Standards and the UNGuiding Principles on Business and Human Rights.

Our Health, Safety, Security, Environment and SocialPerformance Control Framework expects us to, first, avoidor, where this is not possible, minimise our impacts onpeople through project design. For example, in 2018,original plans for an above ground pipeline in Germany,which would have impacted three roads, were changedto a tunnel design following community engagement andagreement with the road agency.

Human rights

Approach to human rights

Supply chains

Security

Labour rights

CommunitiesShell General Business

Principles

Code of Conduct

Shell Supplier Principles

Community feedback mechanisms

Commitment to human rights

Focus areas

Access to remedy

Shell Global Helpline and

internal channels

We work with communities to understand their priorities and concerns. Managing our impact on communities is essential

to being a responsible company.

We respect the rights of our staff and suppliers by working in alignment with international

conventions and guidelines.

The Shell Supplier Principles include expectations for contractors and suppliers concerning human rights.

Shell aims to keep staff and facilities safe, while respecting the human rights and

security of local communities.

20 RESPONSIBLE BUSINESS SHELL SUSTAINABILITY REPORT 2018

http://www.shell.com/humanrights

http://www.shell.com/sustainability/transparency/external-voluntary-codes

We work with local communities to jointly identifysolutions and opportunities. For example, in 2018, weworked with fishermen in Malaysia on a programmecalled “Safety at sea” to promote awareness of thedangers of fishing near oil platforms. We have alsoworked in a similar way to help communities in Colombiato adopt better fishing practices.

INDIGENOUS PEOPLESOur activities in certain parts of the world affectindigenous peoples who hold specific rights for theprotection of their cultures, traditional ways of life andspecial connections to land and water. Shell hasdeveloped a public position statement on Free PriorInformed Consent (FPIC), a priniciple recognised in theUnited Nations Declaration on the Rights of IndigenousPeoples. Our statement is based on a prerequisite toengage in dialogue with local indigenous communitiesand come to a joint agreement on the way forward inproject development. For example, the LNG Canadajoint venture (Shell interest 40%) was planned anddesigned by working closely with local communities, FirstNations (indigenous peoples) and governments.

We continue to seek the support and agreement ofindigenous peoples potentially affected by our projects.We do this through mutually agreed, transparent andculturally appropriate dialogue and impactmanagement processes.

CULTURAL HERITAGEPreserving cultural heritage is an important part ofmanaging social impact. When two slave cemeterieswere discovered five years ago in a sugar cane field nextto Shell Convent Refinery in Louisiana, we commissionedan archaeological and genealogical study. The propertyis owned by Shell and contains the remains of more than1,400 people. Together with the River Road AfricanAmerican Museum, we decided to invest in protectingand preserving the cemeteries for future generations.Dedication ceremonies were held in March 2018. Theproject has resonated strongly with descendants,members of the local communities and our employees.

INVOLUNTARY RESETTLEMENTShell company operations sometimes require temporaryor permanent access to areas of land or sea wherepeople are living or working. Where resettlement isunavoidable, we work with local communities to helpthem relocate and maintain, or improve, their standard ofliving. If necessary, we help support them as theyestablish alternative livelihoods.

In Kazakhstan, an expansion of the safety perimeteraround the Karachaganak field, owned and operated byKarachaganak Petroleum Operating B.V. (KPO) (Shellinterest 29.25%) required 464 families from the villages ofBerezovka and Bestau to be resettled. The physicalresettlement of the families was successfully completed in2018 with work currently underway to support therestoration of their livelihoods and monitortheir resettlement.

KPO worked with the government and communitiesto help people obtain comparable or better housing andrestore their livelihoods. Resettlement started in 2015 andwas carried out in accordance with KPO’s finalproduction sharing agreement, current legislation of theRepublic of Kazakhstan and international standards forresettlement (IFC Performance Standard 5). Read more atwww.shell.com/resettlement.

EXTERNAL VOICE

When the safety zone around KarachaganakPetroleum Operating BV’s (KPO) facility in Bestau,Kazakhstan, was expanded, nearby residents likeZauresh were required to move home.

“I have lived over 40 years in Bestau and my childrenwere born here. This is my home. So, I would like tothank the KPO management for this opportunity tospend the rest of my life in favourable and good livingconditions. This means the world to me and my family.We have a community grievance procedure in placeso we can contact the community liaison officer atKPO any time. KPO continues to monitor theresettlement and assist with repairs and otherproblems when we report them via the communityfeedback tool.”

Zauresh SelbayevaResident of Araltal, Kazakhstan

SECURITYManaging security risks helps protect our employees,contractors, fence-line communities and the environment.

In line with our goal of no harm to people, we carefullyassess the security threats and risks to our operations.We work with governments and partners to safeguardassets and provide a secure working environment foremployees and contractors. Shell only uses armedsecurity in countries where the threats are most severe, orif it is a requirement under local laws.

Given our digitalisation efforts and increasing reliance oninformation technology systems for our operations, wecontinuously monitor external developments and activelyshare information on threats and security incidents. Shellemployees and contract staff are subject to mandatorycourses and regular awareness campaigns aimed atprotecting us from cyber threats.

We periodically test and adapt cyber-security responseprocesses and seek to enhance our security monitoringcapability. Read more about our approach to cybersecurity in our Annual Report.

SSecurecuritity and human ry and human riigghthtssWe work to maintain the safety, security and humanrights of our employees, contract staff and localcommunities. The Voluntary Principles on Security andHuman Rights (VPSHR) are implemented across Shellwhere there are identified threats of infraction.

21RESPONSIBLE BUSINESSSHELL SUSTAINABILITY REPORT 2018

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We continue to play an active role in the VoluntaryPrinciples Initiative, considered the benchmark for humanrights standards related to security. In 2018, a Shellrepresentative was a member of its steering committee,working with other partners on the initiative to advancesecurity and human rights implementation. The steeringcommittee drives the initiative’s agenda and helps buildconsensus across the various stakeholders, who includegovernments, civil society organisations and major oiland gas companies.

We include VPHSR clauses in our private securitycontracts and raise the principles in engagements withpublic security forces. We carry out annual riskassessments and develop plans to manage the identifiedrisks. For example, in 2018 in Iraq, we trained the Iraqi OilProtection Force (the government security force) onVPSHR as part of a broader skills training programme.And in Nigeria, we maintained a regular dialogue onVPSHR with the government security agencies and workto deliver human rights training.

Read more about our approach to security and humanrights at www.shell.com/humanrights.

KEEPING SAFEWe work to deliver energy responsibly and safely. Weaim to do no harm to people and to have no leaksacross our operations. We refer to this as our GoalZero ambition.

Every employee and contractor is expected to meet oursafety standards and requirements, including followingour 12 Life-Saving Rules. We continue to strengthen thesafety culture among our employees and contractors.

We expect everyone working for Shell to intervene andstop work that may appear unsafe.

We investigate incidents and aim to learn from them,sharing findings to improve safety performance acrossour industry.

Read more about our 12 Life-Saving Rules atwww.shell.com/lifesavingrules.

PERSONAL SAFETYEvery one of our people plays an important role inmaintaining a safe working environment. We aim for asafety culture that goes beyond compliance. This meanspeople should feel listened to and cared for, andcomfortable raising concerns or dilemmas.

We hold a safety day each year when employees andcontractors across Shell share perspectives about safetyhazards in their work. In 2018, sessions focused on care,dilemmas and avoiding complacency towards everydayrisks (or “risk normalisation").

Our facilities are often located in harsh environments andour people often work in demanding roles, having tomanage many different hazards. We ensure that peoplehave the necessary safety training and skills. For example,everyone working in an offshore location must completebasic offshore safety induction and emergency training insurvival skills.

PPerersonal ssonal safeafetty pery perfforormancemanceIn 2018, following steady and significant improvements inour safety performance over the past decade, thenumber of injuries per million working hours – the totalrecordable case frequency (TRCF) – increased slightly to0.9 compared with 0.8 in 2017.

Total recordable case frequency (TRCF)Injuries per million working hours3.0

0

1.5

10 12 1714 16 1809 11 13 15

The level of injuries that led to time off work in 2018 alsoincreased compared to 2017.

Lost time injury frequency (LTIF)Injuries per million working hours

10 12 1714 16 1809 11 13 15

1.0

0

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Tragically, two people lost their lives while working atShell locations in 2018: one person died at a refinery inGermany and another at an onshore well in the USA.Our fatal accident rate – the number of fatalities per 100million working hours – remained flat in 2018 comparedto 2017.

Fatal accident rate (FAR)Fatalities per 100 million working hours6

0

3

09 11 1613 15 1710 12 14 18

Safety


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PROCESS SAFETYProcess safety management is about keeping ourhazardous substances in pipes, tanks and vessels so theydo not cause harm to people or the environment. It startswith designing and building projects and is implementedthroughout the life cycle of the facilities to ensure they areoperated safely, well-maintained and regularly inspected.

Shell operates a liquefied natural gas regasification terminal inHazira on the west coast of India.

Our global standards and operating procedures definethe controls and physical barriers we believe arenecessary to prevent incidents. For example, our offshorewells are designed with at least two independent barriersin the direction of flow to mitigate the risk of anuncontrolled release of hydrocarbons. Shell companiesregularly inspect, test and maintain these barriers toensure they meet our standards.

In 2018, leaders throughout Shell continued to work withtheir teams to develop a better shared understanding ofprocess safety challenges and behaviours, and how tojointly design improvements. For example, at the Moerdijkchemicals site in the Netherlands, leaders and frontlineoperators co-created an improved approach to safeisolation, which is intended to ensure people anddangers – such as electricity or hazardous chemicals –are separated during operations.

We continue to take steps to better align and improvethe various approaches to managing facilities across ourbusinesses with the aim of having simpler and safer waysof working. These steps include starting to introduce asingle global asset management system to be adoptedby Shell-operated facilities and some non-operatedventures. The system provides asset managers with anoverview of steps they should take for safe and efficientmanagement of facilities. For example, it includesexpectations related to asset equipment care,maintenance, learning from incidents and conductingassurance. Having a single system is expected to helpShell companies improve the way they manage thesafety performance of assets. It also helps to foster betterknowledge management and networking acrossbusinesses to enable us to accelerate lessons learnedacross Shell.

PrProceocess sss safeafetty fy fundamentundamentalsalsSince 2016, we have been embedding a set of processsafety fundamentals across Shell, which provide clearguidelines for good operating practice to preventunplanned releases of hazardous materials. We haveencouraged employees and contractors at facilities touse these fundamentals in everyday conversations to givevisibility to safety dilemmas, so they can be resolved.

Read more about our approach to process safety atwww.shell.com/process-safety.

PrProceocess sss safeafetty pery perfforormancemanceIn line with industry standards, we measure and reportprocess safety incidents according to significance, withTier 1 as the most significant. Following the disappointingresults in 2017, when our process safety performancedeteriorated, there has been renewed focus and effort inall businesses in 2018 to improve performance, includingfurther implementation of our ProcessSafety Fundamentals.

10 process safety fundamentals

Always use two barriers for hydrocarbon and chemical drains and vents

Do not leave an open drain or critical transfer unattended

Take interim mitigatingmeasures in case offailure of Safety Critical Equipment

For all defined high-riskactivities, follow theprocedures and sign off after each step

Walk the Line – Verify and validate any line up change

Do not make a changewithout a proper Management of Change

Verify for complete tightness aftermaintenance work

Always check thatequipment is pressurefree and drained, andprovides safe isolation before startingmaintenance work

Perform Management of Change and install backflow protection when connecting utilities to process

Respond to criticalalarms


http://www.shell.com/safety/process-safety

The number of Tier 1 and 2 operational process safetyevents decreased from 166 in 2017 to 121 in 2018, ofwhich 35 were Tier 1 and 86 were Tier 2, returning to ourmulti-year improvement trend.

In 2018, the most significant incidents related to processsafety were a fatality at our Rheinland refinery inGermany and a spill at the Trans Ramos pipelinein Nigeria.

Tier 1+2 process safety eventsexcluding sabotage500

0100200300400

2014 2017 20182012 2013 2015 2016

Tier 1Tier 2

a

a

b

b

Process safety events related to sabotage and theft inNigeria are recorded separately. There were nine Tier 1events in 2018, the same as in 2017.

Read more about Shell and safety at www.shell.com/safety.

PRODUCT STEWARDSHIPWe work to ensure our products - such as fuels, lubricantsand chemicals - are safe throughout their life cycle. Ourgoal is to protect employees, customers, communities andthe environment from potential risks posed bythese products.

Good product stewardship means we assess andmanage the products’ potential health, safety andenvironmental risks. We work with our customers andsuppliers, monitor changes in the science behind ourproducts and support research to reduce risks. Wecommunicate the potential hazards associated with ourproducts and publish safe handling information on labelsand safety data sheets.

We also comply with, and monitor changes to,applicable regulations. In regions around the world,various regulations designed to create a more circulareconomy are in development and we are preparing tomeet those requirements when they are introduced.

We also support safe and sustainable products throughthe use of internal reviews for products we develop. OurOilSafe programme uses a classification process, forexample, to identify lubricant additives that havecharacteristics that could lead to handling risks, such as alow flash point or hazardous or toxic components. Whenthese substances are part of a formulation, our processrequires that their use be reviewed. Based on our reviewresults, we either stop use, replace the additive, orimplement controls to reduce the risk of handling thefinal product.

You can read more about our product stewardship, aswell as our commitment to animal welfare in relation toproduct safety testing at www.shell.com/product-stewardship.

RAISING STANDARDSACROSS THE INDUSTRYWe share our safety experience and standards withother operators, contractors and professionalorganisations, including the International Association ofOil & Gas Producers (IOGP) and the Energy Institute.

In 2018, we shared training materials with the EnergyInstitute, including toolkits that encourage reflection onhow incidents with potential safety risk could bemanaged and how participants could apply the lessonslearned in their line of work.

We have also started sharing what we have learnedfrom the tragic road tanker incident that took place inPakistan in 2017 with others in the fuel transportindustry (see Pakistan section below).

IN TRANSPORTMoving large numbers of people, products andequipment by road, rail, sea and air poses safety risks.We develop best-practice standards within Shell toreduce transport safety risks, and work with specialistcontractors, industry bodies, non-governmentalorganisations and governments.

In shipping, for example, we are working with ourcontractor partners on a programme to improve thequality and consistency of their safety management andon tools to help learn from incidents. In 2018, we visitedmore than 700 ships to engage mariners on safety andmake the programme more effective.

We also launched a new risk model for accidentprevention. In the past, the shipping industry mostly reliedon learning about incidents after they have happened.This new statistical model recognises precursors or smallleading events, such as a small leak or technical issue, topredict the risk of a serious incident. Identifying theprecursors allows companies to address them, whichhelps to reduce the potential for significant incidents.

In the air, chartered planes, which fly around 11,000hours a year for us, are used to transport passengers,observe pipelines and carry out geophysical surveys.Everyone at Shell working in an offshore location mustcomplete basic offshore safety induction and emergencytraining (BOSIET) in survival skills.

We use helicopters for about 52,000 flying hours a year to carrypeople to and from facilities onshore and offshore.

In 2018, we worked on a programme with offshorehelicopter safety association HeliOffshore, the IOGP,aircraft manufacturers and aviation regulators to drivesafer ways of working with aircraft. This includedimproving helicopter vibration monitoring systems,passenger survival training and survival equipment.


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Also in 2018, we saw growth in the use of remotely-piloted aircraft systems – or drones – and they are nowused regularly. This technology helps our teams toconduct tasks, such as inspecting the condition of oil andgas facilities and infrastructure in high or hard to reachplaces, more safely and efficiently.

An inspection of QGC Pty Limited's gas production operations inAustralia only took two days compared to weeks of traditionalground inspection, saving around 6,500 kilometres of driving.

Road traffic accidents claim around 1.35 million livesevery year, according to the World Health Organization.Shell employees and contractors drove a combineddistance of around 600 million kilometres on business in2018 in more than 60 countries. There were no roadtransport related fatalities in 2018 in assets and activitiesunder the operational control of a Shell company.

We run road safety programmes, such as our mandatorydefensive driving course, which teaches safe techniquesand behaviour.

We require everyone driving more than 7,500 kilometres a year onShell business on public roads and those who drive in high-risk roadsafety countries to take an in-vehicle defensive driving course.

In 2018, around 3,200 people completed some form ofin-vehicle training. We also introduced an annual onlinedefensive driving training course, which consists of sevendifferent modules with a focus on hazards such as fatigue,for all who drive on public roads on Shell business.

In the USA, rising energy industry activity in the Permian Basin hasled to increased traffic and more serious road accidentsand fatalities.

SWEPI LP, a subsidiary of Shell Oil Company, has takenproactive steps to improve safety in the Permian Basin,including piping water to operations to reduce watertrucks on the road and building accommodation forworkers to split up long journeys.

We also work with our industry peers, such as operatorsand contractors, to develop policies that improve roadsafety. For more information about these efforts, see Theroad to better safety.

Outside our operations, we also work to improve roadsafety in several communities and countries wherewe operate.

MMyyanmaranmarThe Yangon-Nay Pyi Taw highway is known for its highaccident rate. In 2017, Shell Myanmar Energy PrivateLimited launched a road safety campaign with theMyanmar Red Cross Society and the Global RoadSafety Partnership to educate drivers and communities onsafe road use. In October 2018, the second phase of thecampaign was launched, covering the entire Yangon-Nay Pyi Taw-Mandalay highway.

The campaign reminds motorists to drive carefully andreturn home safely by using billboards and signs withmessages from children. We also worked with thecampaign partners using social media to educate andencourage a wide audience on safe driving habits androad use.

More than 6.5 million drivers have been exposed to theroad safety messaging on the highway and 7.5 millionpeople have been reached through the nationalcampaign.

In December 2018, our road safety campaign on the Yangon-NayPyi Taw highway was recognised for its effectiveness in deliveringchange by the prestigious Prince Michael International RoadSafety Award.


https://www.shell.com/inside-energy/permian-basin-texas-usa-road-safety.html


EXTERNAL VOICE

TechnipFMC is a global contractor that has workedwith Shell on several major construction projects,including the Kaikias deep-water oil and gas projectin the Gulf of Mexico. TechnipFMC participates in ourcontractor safety leadership initiative whichencourages us to work more closely to improve safety.

“We set out to optimise the design of the Kaikiasdeep-water project in the Gulf of Mexico by taking anintegrated approach, working closely with the Shellteam. This meant taking steps included executivesengaging early with each other and theirpeople, using a single execution team, a simplifiedarchitecture and using next generation products. Shellempowered us to implement our health, safety,security and environmental management plan, whichwas a key factor for both companies to focus on acommon safety goal, Goal Zero, which is to achieveno harm and no leaks across all operations. All thishelped us achieve an exceptional safety record. Ouraligned objective was to deliver an accelerated timeto first oil and a sustainable capital expenditurereduction in a safe and responsible manner. Shell’scontractor safety leadership programme allowed us toidentify collaborative strategies to successfullyaccomplish our shared objective.”

Doug PferdehirtChief Executive Officer, TechnipFMC

IndiaIndiaIn India, Shell India Markets Private Limited worked withthe transport ministry on an awareness campaign onsocial media which reached close to 7 million peopleacross the 10 most accident-prone cities in the country.IndiGo airlines and Mahindra Logistics have now joinedthe campaign.

PPakakisisttananIn June 2017, a devastating roll-over incident occurred inPakistan involving a road tanker hired by a company thatwas providing road transport services to Shell PakistanLimited, following which people from a nearby villageapproached the incident site to collect spilled fuel.Tragically, the fuel ignited resulting in the loss of morethan 200 lives and left many other peopleseriously injured.

Following the incident, Shell Pakistan Limited providedimmediate relief support including providing food suppliesfor 150 affected families for nine months and medicalsupplies to hospitals. Shell Pakistan Limited has alsocontributed to long-term relief efforts for those impacted.For example, the CARE Foundation, in partnership withShell Pakistan Limited, has ‘adopted’ two public schoolswithin the impacted villages to improve infrastructure andeducation standards. Shell Pakistan Limited is alsoworking with the National Rural Support Programme tohelp restore livelihoods of people in affectedcommunities, providing vocational training and supportfor setting up small businesses.

We finalised our internal investigations in 2018 and wecontinue to implement our learnings from the incident. Thisincludes deep reflection by the Royal Dutch Shell plcBoard and Executive Committee, who have initiatedseveral improvement programmes to be adoptedthroughout Shell globally. We have developed andstarted the implementation of a road transportimprovement project, specifically targeted at themanagement of fuel transport in high-risk countries. Weare working with road transport companies in otherlocations where factors relevant to the Pakistan incidentmay exist and have also started sharing what we havelearned with others in the fuel transport industry.

Shell Pakistan Limited continues to work with regulators,emergency services and the wider oil and gas industry inPakistan with a view to improving safety standards. ShellPakistan Limited has also required the road transportcompanies it hires to improve the safety of their transportfleets and has ongoing safety engagements with hauliersand their drivers, seeking to help them to identify andaddress the risks associated with driving fuel tankers. Thishas included emergency response drills to build andtest capability.

Road transportation remains a challenging and complexarea for industry worldwide. Sadly, in October 2018,there was another roll-over incident in Pakistan involving acustomer tanker, which resulted in the death of the reliefdriver and a spill. This incident was outside of Shell’soperational control and outside of our reporting scope.


WITH OUR CONTRACTORSWe employ a large number of contractors who oftenperform activities with high safety risk. We work with ourcontractors to ensure they understand our safetyrequirements and together we build skills and expertise toimprove safety performance.

For example, Shell’s Pulau Bukom Manufacturing Site inSingapore continued to embed a programme to improvesafety by encouraging people to identify hazards andtake ownership of barriers to keep themselves and otherssafe. The Blue Zone Barrier Thinking programme,originally successful in our lubricants business, usesbriefing materials with clear, simple language and visualsthat enhance daily safety sessions, and encouragessupervisors to hold discussions rather than tell teamsabout risks. Around 6,000 Shell employees andcontractors, from diverse backgrounds and nationalities,work at the Bukom site.

WWororkking ting toogegettherherSince 2014, executives from Shell have collaborated inpairs with executives of major contractor companies – aspart of Shell’s contractor safety leadership programme –to identify strategies and practical steps to improve safetyculture and achieve our Goal Zero ambition of no harmand no leaks, including driving standardisation together.The programme has a joint safety vision – what they calla declared future – and now includes 19 companies.One of these companies, TechnipFMC worked with us todeliver the Kaikias project in the Gulf of Mexico ahead ofschedule, with an outstanding health, safety andenvironmental rating. Together, we set the project up tosucceed through early engagement and by agreeing tosimplified structures and processes.

After five years of preparation and onshore work, andeight months of offshore work, Heerema MarineContractors (HMC) completed the offshore installation ofthe Appomattox (USA) project for Shell in October. Theexecutive pair’s close collaboration and alignment,nurtured throughout the project execution, helped todeliver an outstanding safety performance. Almost830,000 offshore man hours of work were spent onHMC’s deep-water construction vessel Balder withoutsignificant incidents.

In 2018, Shell and these major contractor partners signedup to a set of principles with the goal to improve workerwelfare within our industry (see Supply chain).

PREPARING FOR EMERGENCIESWe make sure that we have the necessary resources todeal with spills, leaks, fires and explosions, both offshoreand onshore. We regularly test our oil-spill andemergency response procedures and capability to ensureemployees and contractors can respond rapidly toan incident.

In 2018, we trained around 850 employees on four large-scale oil spill exercises – two in the USA, one inKazakhstan and one in the Philippines. All the exercisesinvolved our emergency response contractors and jointventure partners, and local authorities. The eventsincluded training followed by two-day exercises to testand practice our organisational capability to manage aworst-case spill incident.

For example, in our Kazakhstan joint venture NorthCaspian Operating Company (NCOC) (Shell interest16.81%), an exercise designed and led by Shell simulateda leak from a damaged oil pipeline near reed beds inshallow water, making it difficult to respond by boat. Thesimulation tested the necessary procedures required toeffectively use dispersants and control in-situ burning. Theexercise involved close collaboration with our jointventure partners and local government officials.

All our offshore facilities have plans in place to respondto spills. We have resources available on location, forexample, floating barriers to contain an oil spill, orthrough our contractors, such as collection vessels andaircraft used for spill monitoring or dispersant sprayingwhen permitted. We were founding members of theSubsea Well Response Project consortium (now part ofthe Oil Spill Response Limited), an industry group whichaims to improve well-containment globally, and theMarine Well Containment Company, a non-profit industrybody providing a response system for the Gulf of Mexico.

During drilling operations, we gather and analyseinformation about wells to better understand the geologyof the area. Pressure and temperature sensors trackconditions in real time so that we can immediately detectany changes. Shell-operated drilling activities arecontinually monitored from onshore operating centreswhich allow oversight and timely technical support.

OUR APPROACHWe carefully consider the potential environmental impactof our activities and how local communities might beaffected during the lifetime of a project.

We aim to comply with all applicable environmentalregulations, continually improve our performance andprepare for future challenges and opportunities. We useexternal standards and guidelines, such as thosedeveloped by the World Bank and its InternationalFinance Corporation, to inform our approach.

We follow global environmental standards for managingour emissions, minimising our use of fresh water and

conserving biodiversity. Within our operations, we alsofocus on reducing energy use, flaring less gas andpreventing spills and leaks of hazardous materials.

When planning new major projects, we carry outdetailed environmental, social and health impactassessments (see Embedding sustainability into projects).

As a member of the Natural Capital Coalition, wecontinue to follow work on the evolving concept ofnatural capital – the value of nature to people, society,business and the economy.

Environment


BIODIVERSITY AND SENSITIVE AREASWe seek to understand and respond to any potentialimpacts our activities may have on biodiversity. Thisincludes the benefits that people or businesses derivefrom ecosystems, such as food and clean water.

In our projects and operations, we aim to avoid impactson biodiversity and ecosystem services. Whereavoidance is not possible, we aim to minimise our impact.Where our operations have affected biodiversity and thecommunities who rely on biodiversity for their livelihoods,we take measures to help restore impacted habitats. Welook for opportunities to make a positive contribution toconservation where we operate.

Once barren, an area of 1,200 hectares along the Hazirapeninsula now thrives with animal and plant life. Shell and itspartners planted mangroves as part of the coastlinerestoration project.

We develop biodiversity action plans when operating inareas that are rich in biodiversity, known as criticalhabitats, to assess and mitigate our impact on localbiodiversity and dependent communities. To help usimprove our environmental performance, includingprotecting biodiversity, we work with scientific andconservation organisations around the world.

We support research programmes to protect life belowwater, for example to increase our understanding ofmarine mammals and their behaviour and find ways tominimise the impact on them when working in marineenvironments. Shell is a member of the InternationalAssociation of Oil & Gas Producers Joint Industry

Programme on Sound and Marine Life, an initiative toimprove understanding of the effect that sound generatedby oil and gas exploration and production has onmarine life.

In 2018, the joint industry programme worked withacademia and regulators to review progress of itsresearch. Since 2006, it has funded $60 million ofresearch leading to about 120 peer-reviewedpublications, which help operations planning and toinform industry mitigation strategies and governmentregulations. An example of this is the study carried out byLeiden University and its partners in 2018, where cod inthe North Sea were tagged and observed during anexperiment using seismic sounds.

BIODIVERSITY MANAGEMENT IN CANADAThe LNG Canada project has carried out impactassessments and developed comprehensive managementand mitigation plans to respond to and offset the impactsthat activities may have on the local marine environment.

In Canada, we are releasing about 50,000 squarekilometres of exploratory permits off coastal BritishColumbia to support marine conservation efforts. We areworking with the Government of Canada in consultationwith indigenous peoples and environmental groups tosupport effective conservation outcomes.

Shell’s contribution is in line with the Government ofCanada’s commitment to conserve 10% of Canada’scoastal and marine areas by 2020, and the aim ofgovernment, indigenous communities and environmentalorganisations to advance marine conservation.

At Shell Canada's Groundbirch natural gas project inBritish Columbia, a collaboration with the Twin SistersNative Plant Nursery, a local indigenous-owned business,is enabling reclamation of the natural landscape usingtraditional knowledge and native plant species (seeDelivering natural gas in Canada).

Read more at www.shell.com/biodiversity.


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WATER USEFew natural resources are as essential as fresh water andits importance will only rise as the world’s populationincreases and developing economies continue to grow.The availability of fresh water is a growing challenge insome parts of the world, as it is not always availablewhere people need it or in a form that is easy to use.

We carefully manage our water use and discharges. Wedesign and operate our facilities to help reduce freshwater use, and we tailor our use of fresh water to localconditions because water constraints affect people at thelocal or regional level.

Water use

Water consumptionWe consume water in our production, refining and petrochemicals operations

TreatmentWe treat produced water and waste water to regulatory standards

After treatment, water is reused or recycled in our operations, reinjected into the oil or gas reservoir, returned to the environment or disposed through permitted outlets

Fresh water withdrawalFresh water is taken from surface water, groundwater or public utilities

Offshore and onshore production

Refining, manufacturing and chemicals activities

Produced waterProduced water is brought to the surface during the production of oil and gas

Waste waterWater that comes into contact with oil and gas or chemicals in our operations is waste water

ASSESSING WATER CONSTRAINTSOur environmental, social and health impact assessmentshelp us to better understand the water risks for ourprojects and broader watershed impacts. We evaluatethe long-term sustainability of water resources to selectthe option that avoids or minimises disruption to theenvironment and other users.

We assess risks based on water availability, quality andaccessibility. To help us define water stress conditions, weuse a combination of publicly available water stress tools,such as the World Resources Institute’s Aqueduct WaterRisk Atlas, and information specific to thelocal environment.

In water-scarce areas, we develop water managementplans for our facilities. These plans describe the long-termrisks to water availability and define measures to minimiseour use of fresh water or recommend alternatives, such asrecycled water, processed sewage water anddesalinated water.

For example, in 2018, Shell affiliate QGC Pty Limited'snatural gas project in Queensland, Australia, continued toconduct research into groundwater-dependentecosystems in the Surat Basin. We want to determine theimpact of water use in areas where surface water isabsent for large parts of the year and where ecosystemsare dependent on groundwater. We have a robustmonitoring programme with response plans in place toidentify and mitigate any impacts from our operations.

Read more at www.shell.com/water-use.


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FRESH WATER USE PERFORMANCEIn 2018, our intake of fresh water was 199 million cubicmetres, about the same as 2017. Around 90% of our freshwater intake was used for refining oil products andchemicals, with the balance mainly consumed in oil andgas production. Around 40% of fresh water intake wasfrom public utilities such as municipal water supplies.

Fresh water withdrawn and consumedmillion cubic metres300

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Fresh water consumedFresh water withdrawn

Fresh water withdrawn by businessmillion cubic metres250

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The volume of fresh water withdrawn by our Downstreambusiness increased in 2017 and 2018, due primarily tothe inclusion of two refineries previously operated by theMotiva joint venture in the USA in our data from May2017. This increase was partly offset by the exclusionof oil sands when operatorship was transferred toanother company, Canadian Natural, in 2017 (oil sandsdata are included in Others in the graph).

WASTE WATER AND PRODUCED WATERWe develop technologies to treat, reuse and recyclewater from our operations so that we can manage ourwater footprint in a responsible way while meetingenvironmental standards. Where appropriate, we look forways to treat water from our operations using naturalsolutions such as constructed wetlands.

We have worked for several years to improve watermanagement at our unconventional projects. Forexample, SWEPI LP – a subsidiary of Shell OilCompany – at its operation in Appalachia, USA, sharesproduced water with other operators in the region so itcan be reused, thereby minimising disposal ofwaste water.

At the Groundbirch shale gas project near Fort St. John,Canada, we minimise the use of fresh water by storing,recycling and reusing produced water. However, theasset still has excess waste water in the system that needsto be managed responsibly. In 2018, we started testing anew technology unit which enables us to dehydratewaste water at the point of creation and evaporate cleanwater back to the atmosphere, reducing waste watervolumes for disposal.

We track low-level concentrations of oil, grease andother hydrocarbons within water returned to theenvironment from the day-to-day running of our facilities(collectively referred to as “discharges to surface water”).We work to minimise these discharges in line withregulatory requirements and our own standards to reducethe potential for environmental impacts on local waterquality. In 2018, the combined total hydrocarbonsdischarged to surface water from our facilities was 1.4thousand tonnes, up from 1.2 thousand tonnes in 2017.This was mainly due to changes in how we collect andanalyse samples and calculate the amount of oildischarged to water at our Pulau Bukom site inSingapore.

WORKING WITH OTHERSWe support open innovation and work closely withorganisations, such as the World Business Council forSustainable Development (WBCSD) and IPIECA, theglobal oil and gas industry association for environmentaland social issues.

In 2018, Shell led the development of water horizonscanning through IPIECA’s Water Working Group. Aswater trends, regulation and policy advance, it isimportant that IPIECA tracks these trends proactively toallow members to plan for the future.

Shell is a member of the Water Nexus consortium in theNetherlands, a collaboration between universities,government bodies and industry. The consortium supportsresearch on innovative approaches to secure watersupply essential for domestic, industrial and agriculturaluse, such as green infrastructure and the use of salinewater instead of fresh water.

SOIL AND GROUNDWATERWe assess and carefully manage the risks of potentialsoil and groundwater contamination. We conductscientific research on the behaviour and potential risks ofcontamination from petroleum activities and share ourfindings with government agencies, researchers and otherstakeholders to support the development ofenvironmental guidelines.

Soil and groundwater remediation is designed to mitigaterisks to health and the environment, but can also generateits own environmental, social and economic impacts. Webelieve remediation activities can be made moresustainable and have co-authored the first ISO Standardon Sustainable Remediation. We have started to applythe approach in our own soil and groundwater projects.


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http://waternexus.nl/

Shales – also known as tight gas and oil – will continueto play an important role in meeting global energydemand. We remain focused on producing oil and gasfrom shales safely and responsibly, using advances intechnology and by following our onshore operatingprinciples.

We are involved in six shale plays in the Americas andexpect the shales business to become a significantgrowth priority for Shell in the next decade.

In 2018, we focused on production growth at the SWEPILP (a subsidiary of Shell Oil Company) light tight oilfacilities in the Permian Basin in the USA and our facilitiesat Fox Creek in Canada, bringing new wells online andinvesting in supporting infrastructure.

TACKLING EMISSIONSAddressing air quality and fugitive emissions is a toppriority in our shale operations. Our approach includesvoluntary methane leak detection and repairprogrammes, primarily using optical gas imaging cameras(see Methane emissions).

In 2018, Shell and its partner Avitas Systems, were thefirst in the USA to gain approval for flying commercialdrones beyond visual line of sight with the support ofradar, which enables next generation detectiontechnology such as surveillance drones.

U.S.A.

Permian basin

Drones use onboard sensors and cameras to collectdata. They can allow us to automate tasks, includingdetecting oil and gas leaks, corrosion, abnormal heatsignatures, and monitoring road conditions. They alsomitigate significant risk to personal safety by reducing theroad exposure of our operations teams and providingbetter insight into the overall condition of facilities. Thiscould enable teams to proactively identify issues and fixthem faster, while also reducing safety exposure.

Producing shaleoil and gasresponsibly

Shell is testing drones in the Permian Basin to survey infrastructure across vast stretches of land faster than ever before.


https://www.shell.com/energy-and-innovation/natural-gas/tight-and-shale-gas/shells-principles-for-producing-tight-shale-oil-and-gas.html

https://www.shell.com/energy-and-innovation/natural-gas/tight-and-shale-gas/shells-principles-for-producing-tight-shale-oil-and-gas.html

ROAD SAFETYRising oil and gas production activity in recent years inthe Permian Basin has led to increased traffic and moreserious accidents and fatalities.

The shale revolution has transformed the Permian region, bringingthousands of oil and gas workers and causing a massive spikein traffic.

As a founding member of the Permian Road SafetyCoalition, we successfully advocated and helped secure$1.8 billion in funding from the Texas Department ofTransportation to help find ways to reduce risks on theroads. This work includes agreeing to policies such aslowering the 75 mile-per-hour (120km/hour) speed limit,widening roads and constructing passing and turninglanes to minimise conflict points prone to crashes.

Read more about this ongoing work at www.shell.com/permian-basin-road-safety.

In 2018, Shell also collaborated with 16 energycompanies that together pledged to set aside $100million over the next few years to ease the increasein demand for roads, healthcare, education andaffordable housing from the rising shale activity in WestTexas and New Mexico. The aim is to preserve thequality of life that make so many want to live and work inthe region.

Shell has provided funding and support for medical clinics in thePermian region. Many of the operations in the Permian region aretwo or more hours away from hospital services.

WATER USEWe have worked for several years to improve watermanagement at our shale facilities in Canada. At Shell'sGroundbirch project, in British Columbia, we minimise theuse of fresh water by storing, recycling and reusingproduced water (see Delivering natural gas in Canada).

At Fox Creek, Alberta, we also agreed with themunicipality to use treated waste water for hydraulicfracturing and the municipality helped upgrade thetown’s reclaimed water facilities.

For more details on our approach, see Water use.

LOCAL COMMUNITIESIn 2018, we held extensive engagement sessions withindigenous people, local farmers, and nearbycommunities in the Vaca Muerta shales basin inNeuquén, Argentina. This included training programmesfor local community members interested in joining theindustry and a programme that promoted livestockproduction and farming, and helping local farmers gainbetter access to water. Through this outreach, we havemanaged to develop strong relationships with thecommunity in the basin, avoiding impact on other peopleand disruption to our activities.




DECOMMISSIONING AND RESTORATIONSafe and responsible decommissioning is a priority forShell. This includes restoring the surroundings of platformsand facilities in line with relevant legislation, while takingour own environmental standards into account.

Decommissioning is part of the normal life cycle of everyoil and gas structure when a facility reaches the end of itslife. A growing number of oil and gas platforms andfacilities are ageing, and their economically recoverablereserves offshore extracted, so we expectdecommissioning will increase over the next few decades.

Every decommissioning project is different and needs tobe tailored to the facility design, local context and locallegislative requirements. Some of our more complexdecommissioning projects take place offshore.

Our largest decommissioning project to date is the Brentoil and gas field, which lies in the North Sea betweenthe UK and Norway. Preparation for decommissioningthe four Brent platforms – Alpha, Bravo, Charlie andDelta – started more than a decade ago.

The 24,200-tonne Brent Delta topside, which was removed andbrought onshore in 2017, is being recycled in Hartlepool, UK.

In 2018, we made significant progress in dismantling the topside.

We expect to recycle more than 97% of Brent Delta's material.Furniture, equipment and lighting has been donated tolocal charities.

In 2018, Shell also received regulatory approval todecommission the Tapti field, a former BG project inIndia. Through our subsidiary BG Exploration andProduction India Limited, we jointly operate the project(Shell interest 30%) with Indian National Oil Company,Oil and Natural Gas Corporation and RelianceIndustries Limited. Production at Tapti stopped in March2016 and plugging and abandonment of all 38 wells hasbeen completed. Work is underway to decommission thefield's five platforms and its pipelines.

WASTEWe aim to reduce the amount of waste we generate andto reuse or recycle materials.

In 2018, we disposed of 1,999 thousand tonnes ofhazardous and non-hazardous waste, which is broadlycomparable to 2017.

We also track the amount of residual materials sent off-site for recycling or reuse that otherwise would havebeen disposed of as waste.

In 2018, we sent close to 400,000 tonnes off-site forrecycling or reuse. Six of our downstream manufacturingsites sent more than 50% of their waste generated duringthe year for recycling or reuse in 2018. Of these six, threesites sent more than 80% of their waste for recyclingand reuse.

Waste disposalthousand tonnes

HazardousNon-hazardous

3000

0

2000

1000

10 12 1714 16 1809 11 13 15

We identify effective partnerships when it comes tomanaging our waste. Shell’s floating liquefied natural gas(FLNG) facility Prelude, off the coast of Australia, set up awaste management process with Rusca EnvironmentalSolutions, which is the only 100% indigenous-ownedwaste management contractor in Australia. Thepartnership has generated capacity building opportunitieswith Rusca, enabling the company to develop new skillsand improvements in waste management.

In 2018, Shell’s logistics, information technology andwaste support team identified a waste managementsoftware solution. We believe the system will generatesignificant value through greater transparency andautomation of our waste management proceduresaround the world.


PLASTICSWe produce chemicals that are the raw materials forplastics and plan to produce more as global demandincreases. Plastics provide important benefits, helping toimprove living standards, hygiene and nutrition around theworld. Plastics are often associated with disposable andthrowaway packaging but many products have differentand long-term uses such as medical equipment,computers, smart phones, window frames, sportsequipment and roofing.

Most plastics use fewer resources and have a lowercarbon footprint than the glass, paper and metal theyhave replaced. For instance, efficient plastic insulationand lightweight plastic parts in cars and planes saveenergy, which helps to avoid CO2 emissions. Plastics arealso integral in the construction of renewable energyinfrastructure, such as wind turbines and solar panels.

We share public concern about plastic waste and wantto play an active role in finding lasting solutions to thischallenge. The problem is not with plastics themselves,but what happens after people use them. Sometimeswaste management infrastructure and traditional recyclingdo not exist, or plastic waste is not managedappropriately. And as a result, plastic waste can end upas litter.

We are a founding member of the new Alliance to EndPlastic Waste. This alliance of global companies includeschemicals and plastic manufacturers, consumer goodscompanies and waste management companies, alongwith the World Business Council For SustainableDevelopment. The alliance has committed more than $1billion with the goal of investing $1.5 billion over fiveyears to help end plastic waste in the environment. Itfocuses on four areas: waste infrastructure, innovation,education and clean-up.

WHAT ELSE IS SHELL DOING?We are exploring process technologies to make betteruse of plastics after consumers have finished using them.For example, by turning them into useful liquids that couldbe used as a source of energy, as chemicals or as newproducts, which would help develop a circular economyof plastics.

The Shell Pennsylvania Petrochemicals Complex (ShellChemical Appalachia LLC) in the USA is collaboratingwith local groups to encourage more plastics collection,recycling and education. Shell Retail is helping its servicestations reduce, reuse and repurpose food, paper andpackaging waste across its operations and supply chain,for example by incentivising the use of reusable bags andcups. And Shell Lubricants, our business that makes andsells engine and industrial oils, has a strategy to reduce,reuse and recycle packaging across its supply chains.Shell Lubricants is also exploring different and moresustainable packaging solutions, such as new packagingformats and dispensing and refill solutions.

Read more at www.shell.com/plasticwaste.

FLARINGThe flaring of natural gas wastes valuable resources andcontributes to climate change. We are working hard toreduce flaring associated with oil and gas production.

Flaring is used to safely dispose of hydrocarbons thatcould otherwise pose a hazard to workers, nearbyresidents and facility equipment during non-routineoccurrences. These occurrences include start-ups, processupsets, maintenance turnarounds, and equipment orpower failures where production system pressure must besafely relieved.

In some situations, gas that is produced alongside oil,known as associated gas, may also be flared when thereare insufficient or no facilities to gather the gas.

As a signatory to the World Bank’s "Zero Routine Flaringby 2030" initiative, Shell continues to actively pursue its2015 commitment to eliminate associated gas flaring atits operations by 2030. Shell’s flaring and venting policy,as set out in our Health, Safety, Security, Environment andSocial Performance (HSSE&SP) Control Framework, callsfor facilities to meet strict performance criteria, includingbeing designed to export, use or reinject associated gas.

Our policy also aims to minimise all types of flaring,managed through annually updated greenhouse gas andenergy management plans.

OUR FLARING PERFORMANCEFlaring of gas in our Upstream and Integrated Gasbusinesses contributed around 7% of our overall directgreenhouse gas emissions in 2018. More than 40% of thisflaring took place at facilities where there was noinfrastructure in place to capture the associated gas.

Flaring – upstreammillion tonnes hydrocarbons flared

6

0

3

10 12 1714 16 1809 11 13 15

Our upstream flaring decreased to 5.2 million tonnes ofCO2 equivalent in 2018 from 8.2 million tonnes in 2017.In the Upstream business, reductions in the emissions fromflaring were primarily a result of the divestment of theMajnoon asset in Iraq, and our continuing focus to bringadditional gas-gathering facilities online in Nigeria toreach our goal of zero routine flaring by 2030.

Flaring – upstreammillion tonnes CO2 equivalent20

0

10

10 12 1714 16 1809 11 13 15


http://www.shell.com/sustainability/environment/plastic-waste

Across our Integrated Gas projects and plants, whereflaring occurs only for operational reasons, greenhousegas emissions from flaring have decreased by more than30% since the start of 2016. This has primarily been dueto reduced flaring in our Pearl gas-to-liquids plant (QatarShell GTL Ltd, QSGTL), which continues to deliver a multi-year flare reduction programme. Shell affiliate QGC PtyLimited has also implemented upstream flarereduction projects.

IRAQIn 2018, Shell completed the divestment of the Majnoonfacilities (Shell interest 45%). Flare reduction programmesare continuing and have captured around 52% of theassociated gas that would have been flared in the past.The gas is exported to a local power plant forelectricity generation.

Basrah Gas Company (BGC, Shell interest 44%), is anon-operated joint venture with Iraq’s South GasCompany and Japan’s Mitsubishi. It continued to capturegas that would otherwise be flared from three non-Shell-operated oil fields in southern Iraq (Rumaila, West Qurna1 and Zubair).

NIGERIAIn Nigeria, the levels of hydrocarbons flared from ShellPetroleum Development Company’s joint-venture (SPDCJV – Shell interest 30%) facilities have fallen by 90% sincethe start of the programme in 2002. This decrease ismainly due to investing in facilities that capture theassociated gas and commercialise it through domesticand export markets. Divestments also providedfurther reduction.

Flaring at SPDC JV facilities decreased by around 9% to0.5 million tonnes in 2018 from 0.6 million tonnes in 2017,mainly due to improved compressor availability andfacility outages in the Western Delta.

SPDC remains committed to eliminating associated gasflaring with reductions already realised from associatedgas gathering initiatives such as Adibawa, Otumara andBonny associated gas gathering projects. In 2019, theForcados Yokri Integrated Project and Southern SwampAssociated Gas Gathering Solutions project are plannedto come on-stream to add to these efforts.

Following successful engagements with the FederalGovernment of Nigeria, the SPDV JV has included theremaining flare sites in the Nigeria Flared GasCommercialisation Program. This government-ledprogramme is expected to address these remaining sites.

Nigeria LNG (Shell interest 25.6%), a non-operated jointventure, is identifying ways to reduce flaring by improvingthe reliability of equipment, reducing train start-up timeand delivering operational improvements.

QATARIn Qatar, at QSGTL’s Pearl gas-to-liquids plant, flaringtakes place for operational reasons. In 2018, furtherenhancements have been made to the plant to limit theamount of operational flaring as part of a multi-year flarereduction programme (see Natural gas). Pearl hasreduced its total flaring year on year since 2015 withflaring in 2018 nearly 50% lower than in 2015.

USAWe continued to take steps to reduce flaring at theSWEPI LP (a subsidiary of Shell Oil Company) Permianunconventional oil asset in the USA in 2018. For example,we are investing in operational upgrades that removeflares from well pad design and in new technologies toimprove the reliability of our vapour recovery systems.Since 2017, we have invested around $10 million inoperational improvements to reduce flaring at Permian. In2018, we achieved a reduction in the volume of gasflared per total gas production of more than 80%compared to the 2017 levels.

BRUNEIA review of greenhouse gas performance in 2018highlighted the importance of flare reduction in BruneiShell Petroleum (BSP, Shell interest 50%), a non-operatedjoint venture. Through detailed analysis across allfacilities, BSP developed a multi-year target and plan toreduce flaring intensity.

TRINIDAD AND TOBAGOAtlantic LNG in Trinidad and Tobago implemented aflare reduction project in 2017 to recover LNG vapour(gas) during ship loading activities. A year later, theproject continued to recover the gas, routing it back intothe liquefaction process rather than to the flare.


SPILLS, ENERGY EFFICIENCY AND NON-GHG EMISSIONSWe improved or maintained our environmentalperformance across many business areas during 2018.This was due to operational improvements as well asreduced activities at some of our facilities anddivestments. Details about our environmentalperformance are provided below and in the Greenhousegas emissions, Managing methane emissions andFlaring sections.

SPILLSShell has requirements and procedures in place toprevent operational spills. Shell companies have routineprogrammes to maintain facilities and pipelines, andimprove their reliability, to reduce spills. However, spillsstill occur for reasons such as operational failure,accidents or unusual corrosion.

The volume of operational spills of oil and oil products in2018 was 0.8 thousand tonnes, an increase from 0.4thousand tonnes in 2017, in part due to operational spillson the Trans Ramos pipeline in Nigeria and anunderground leak in Majnoon in Iraq. The number ofoperational spills decreased to 92 in 2018 from 104 in2017. We have programmes in place to reduce thenumber of operational spills over the long term (see10-year data table).

Spills – operational [A]

20

0

10

400

0

200

Number of spills (right axis)Volume in thousand tonnes (left axis)

10 12 1714 16 1809 11 13 15

[A] Over 100 kilograms

Spills – sabotage [A]

20

0

10

400

0

200

Number of spills (right axis)Volume in thousand tonnes (left axis)

10 12 1714 16 1809 11 13 15

[A] Sabotage and theft-related spills of more than 100 kilograms. Allsabotage- and theft-related spills have occurred in Nigeria, except in 2016(0.001 thousand tonnes) and 2015 (0.005 thousand tonnes).

The number of spills caused by sabotage and theft roseto 111 from 62 in 2017. The volume of these spillsincreased to 1.6 thousand tonnes in 2018 from 1.4thousand tonnes in 2017. Sabotage and oil theftremained a significant cause of spills in the Niger Delta,Nigeria. The increase can be partly explained byincreased availability of our production facilities followingthe repair of a major export line in 2017 and the price ofcrude oil and refined products, which is seen as anopportunity for more illegal refining.

We investigate and learn from all spills to improve ourperformance and Shell companies aim to clean up theareas around operations that are affected by spills,irrespective of the cause.

ENERGY EFFICIENCY IN OUR OPERATIONSImproving the energy efficiency of Shell-operated facilitiesis one of the ways we manage greenhouse gasemissions. The main metric is energy intensity, the amountof energy consumed for every unit of output.

Shell-operated facilities and proposed projects thatgenerate more than 50,000 tonnes of greenhouse gasemissions a year are required to produce a greenhousegas and energy management plan with annual updates.These plans must include the sources of greenhouse gasemissions, as well as a forecast of expected emissions atthe site for at least 10 years, and must identify options forimproving energy efficiency or reducing emissions.

Some of the ways Shell improved energy efficiency in2018 include making our equipment more reliablethrough regular maintenance, by smart scheduling ofmaintenance activities and by installing more energyefficient equipment.

We aim for the Shell-operated refineries and chemicalplants to be leaders in energy efficiency. We invest incombined heat and power units and implement heatintegration and waste gas recovery systems. We replacesteam turbine drives with electrical motors and end-of-lifeequipment with higher efficiency types.

The overall energy intensity index of the 17 Shell-operated refineries and chemical plants in 2018 wassimilar to the year before: refineries improved slightly to94.3 in 2018, from 94.8 in 2017 and chemical plantsdeclined slightly to 88.5 2018 from 88.2 in 2017.

Energy intensity – chemical plantschemicals energy index [A]100

80

90

10 12 1714 16 1809 11 13 15

[A] Methodology was updated in 2015. Data for previous years are notdirectly comparable

Energy intensity – refiningrefinery energy index [A]110

90

100

10 12 1714 16 1809 11 13 15

[A] Indexed to 2002; based on 2006 Solomon EIITM methodology.


In 2018, the overall energy intensity for the production ofoil and gas in our Upstream and Integrated Gasbusinesses (excluding liquefied natural gas and gas-to-liquids) increased slightly compared with 2017, partlydue to lower production from the NAM joint venture(Shell interest 50%) in the Netherlands. We expect it willbe difficult to maintain the energy intensity levels of recentyears, as existing fields age and new production comesfrom more energy-intensive sources. This may increase ourupstream energy intensity over time.

Energy intensity – upstream(excluding oil sands, GTL and LNG) gigajoules/tonneproduction [A]

2

0

1

10 12 1714 16 1809 11 13 15

[A] Methodology was updated in 2012. Data for previous years are notdirectly comparable

NON-GREENHOUSE GAS EMISSIONSWe track emissions released into the atmosphere fromour upstream and downstream facilities and work toreduce air pollution from our operations. This includesmaking investments to lower our emissions of nitrogenoxides, sulphur oxides and volatile organic compoundsthat are released during oil and gas production andprocessing. These pollutants can affect air quality in theareas where we operate. We evaluate and take actionto mitigate potential adverse impacts of our emissions.

Our sulphur oxide emissions in 2018 decreased to 69thousand tonnes compared with 81 thousand tonnes in2017, primarily due to higher sulphur recovery at thePulau Bukom refinery in Singapore in 2018 (the sulphurrecovery unit was offline for part of 2017 due to plannedmaintenance).

Our nitrogen oxide emissions increased from 107thousand tonnes in 2017 to 111 thousand tonnes in 2018,primarily the result of additional vessels joining ourshipping fleet.

Our emissions of volatile organic compounds (VOCs)decreased to 59 thousand tonnes in 2018 from 95thousand tonnes in 2017, mainly due to the divestment ofour interest in the Majnoon project in Iraq. We expectour VOC emissions to further decrease in the comingyears as a result of our efforts to reduce flaringand venting.

Read about Shell's Greenhouse gas emissions.


Shell has interests in several companies in Nigeria thathelp power economic growth and improve the quality oflife for Nigerians. Safety and security remain top prioritiesand we continue to work closely with federal and stategovernment agencies, communities, civil society,contractors and joint venture partners to create a safeoperating environment.

Shell Companies in Nigeria produce oil and natural gas,distribute gas to industries and for domestic powergeneration, produce liquefied natural gas (LNG) forexport and generate revenues for the government.

The companies also contribute social investment incommunities and support the development of Nigeriancommunities and indigenous companies.

DEEP-WATER PRODUCTION OF OIL ANDGASUnlocking the rich oil and gas resources in the deepwaters of the Gulf of Guinea can help meet growingenergy demand in Nigeria and international markets.

Since 2005, the Shell Nigeria Exploration andProduction Company (SNEPCo), operator of the Bongafield, has produced more than 819 million barrels of oilcumulatively that generated a stable source of revenuefor the Nigerian government through taxes, royaltiesand levies.

NIGERIA

Niger Delta region

In 2018, SNEPCo continued to use its knowledge,experience and proven deep-water technologies tounlock new resources safely and efficiently.

SUPPLYING GAS TO MARKETSThe Shell Petroleum Development Company of NigeriaLtd (SPDC), the operator of the SPDC Joint Venture(SPDC interest 30%), is working closely with itsgovernment partner, the Nigerian National PetroleumCorporation, to increase gas for power supply.

Economicdevelopment inNigeria

Nigeria LNG operates a facility on Bonny Island in Rivers State that produces LNG for export.


In 2018, SPDC made a commitment to deliver three ofthe government’s seven biggest gas projects, one ofwhich – the Assa North Gas Development Project in ImoState – received its final investment decision inDecember. At peak production, this project is expectedto produce 300 million standard cubic feet of gas perday, contributing to increased power generationand industrialisation.

A new financing model was developed in 2017 toovercome challenges with government funding for theSPDC JV. The model’s purpose is to help fund futureprojects, including those to commercialise the country’sgas resources.

Shell Nigeria Gas, the only wholly-owned subsidiary ofan international oil company involved in gas distributionin Nigeria, expanded its capacity in 2018 by theequivalent of 400 megawatts of gas to power. This wasachieved by adding production facilities in Ogun State. Itwill help to increase gas supply to industries and boostlocal economies, while also providing job opportunitiesto the country.

The Agbara/Ota pressure reduction and metering station in OgunState, where new production facilities were added in 2018.

OPERATING SAFELYThe safety of employees and contractors in Nigeriaremains our top priority. Shell companies there continueto strengthen the safety culture and leadership, whichis focused on achieving no harm to people and no leaksacross their operations. We refer to this as our GoalZero ambition.

In 2018, the number of personal injuries that requiredmedical treatment or time off work decreased to 13 from19 in 2017.

The focus in safety was on three areas in 2018: improvinghow managers stop unsafe work in their teams,preventing objects being dropped from height – acommon hazard in the industry – and marine safety. Thisincluded a business-wide stand-down moment to giveemployees and contractors time to reflect on how toprevent incidents. Campaigns were also run in productionoperations to help people better understand the safetyculture in their workplace.

Shell Companies in Nigeria continue to contribute to thesafety of communities around assets by responding tothird-party fires and emergencies. In 2018, Shellcompanies responded to 69 of these incidents, includingan overturned fuel tanker and a search and rescueoperation on a collapsed hotel building underconstruction, both in Port Harcourt.

EXTERNAL VOICE

Tarakiri Cluster is a collection of six communities inBayelsa State in the Niger Delta that undertakesdevelopment projects and programmes supported bythe SPDC JV and delivered through the globalmemorandum of understanding (GMoU).

“We are working to empower communities toundertake their own development by themselves. TheGMoU cluster in Tarakiri started in 2010 and hasreceived around $5.8 million to finance about 92projects and programmes, including job training, andfor basic services and infrastructure. Around 85 of theprojects have been completed. One ongoingprogramme focuses on enterprise and business skillsdevelopment for women, part of the mandatory 15%funding allocation under the terms of the GMoU, andprovides grants to get their projects off the ground."

Dr. Jude A. EbibokefieTarakiri Cluster Development Board

SECURITY IN THE NIGER DELTASecurity issues, sabotage and crude oil theft in the NigerDelta remained significant challenges in 2018. Shellcompanies there continued to address safety andenvironmental challenges related to illegal activities andoperational spills. Although there has been no majordamage to key oil and gas infrastructure caused bymilitant activity since November 2016, the securitysituation remains volatile in this region of the country.

CONTRIBUTION TO SOCIETYShell Companies in Nigeria continue to support thedevelopment of local communities and companies aspart of their contribution to the economy. We also workwith the government, communities and civil society tofund and implement social investment programmes.Community-driven development programmes andinitiatives also are funded, with focus areas as determinedby benefiting communities.

Shell Companies in Nigeria have provided technical andfinancial support to Nigerian companies across a rangeof sectors, including transport, manufacturing andresearch and development. For example, SAIDEL NigeriaLimited, working on the SPDC JVs South SwampAssociated Gas Project, acquired the first Nigerianflagged pipelay vessel in Nigeria (S900).


At state government and local community levels, ShellCompanies in Nigeria focus their social investmentactivities on areas such as enterprise development,education, health and access to energy. In 2018, Shell’sflagship youth development programme, Shell LiveWIRE,was launched in the Ogbia community in Bayelsa State.The Ogbia community is located close to Oloibiri wherethe first oil well was drilled in Nigeria in 1958 and near toSPDC JV’s Kolo Creek Flow Station. Three categories ofbeneficiaries – university graduates, secondary schoolleavers and informal women traders – undertookentrepreneurship training and on graduation receivedbusiness start-up grants totalling about $90,000. This willenable them to convert their bright ideas into sustainablebusinesses, creating wider employment and incomeopportunities for their communities.

Graduates of the Ogbia LiveWIRE programmereceived entrepreneurship training and start-up grants.

Social and economic contribution

Economic contribution from allSPDC JV partners to the Nigeriangovernment from 2014–2018.

$17.8 billion

Shell Companies in Nigeriacontracts awarded to Nigeriancompanies in 2018.

92%

Employees of Shell Companies inNigeria in 2018 who are Nigerian.

96%

Shell share of royalties andcorporate taxes paid to theNigerian government in 2018(SPDC $0.9 billion; SNEPCo $0.8billion).

$1.7 billion

Shell Companies in Nigeria spendon contracts awarded to Nigeriancompanies in 2018.

$1.3 billion

Niger Delta youth trained inenterprise development andmanagement since inceptionin 2003.

7,072

SPDC JV, SNEPCo and ShellNigeria Gas and All On directspending on social investmentprojects in 2018 (Shell share $31million).

$56.2 million

Funds disbursed by the SPDC JV toGMoU clusters for community-driven projects since inceptionin 2006.

$239 million

SPDC JV and SNEPCo secondaryand university educational grantsawarded since 2011.

13,923

All On, an independent impact investing company withseed funding from Shell, works with partners to increaseaccess to commercial energy products and services forunderserved and unserved off-grid communities inNigeria, with a special focus on the Niger Delta. Off-gridenergy solutions span solar, wind, hydro, biomass andgas technologies deployed by both foreign and localaccess-to-energy companies that complement availablegrid power across Nigeria and help bridge thesignificant energy gap.

In 2018, All On focused on partnerships to helpaccelerate access to electricity at scale. For example, itapproved investments for solar home system providerLumos and for Cold Hubs, a company that provides solarpowered refrigeration for agricultural products. It also co-

invested in a dedicated debt fund for off-grid energycompanies – the Off-Grid Energy Fund – along with theAfrican Development Bank and other leadingdevelopment financial institutions. In addition, All Onpartnered with the United States African DevelopmentFoundation to provide $100,000 in grants andconvertible debt to several enterprises providing off-gridsolutions that deploy renewable resources and powerlocal economic activities.

NIGERIAN LITIGATIONAuthorities in various countries are investigating ourinvestment in Nigerian oil block OPL 245 and the 2011settlement of litigation pertaining to that block (see Note25 to the Consolidated Financial Statements in ourAnnual Report).


https://reports.shell.com/annual-report/2018/consolidated-financial-statements/notes/25-legal-proceedings.php


Shell Companies in Nigeria continue their relentless focuson working with communities and managing their impacton the environment. This means addressing environmentalchallenges related to oil spills in areas with significant oiltheft and illegal refining.

The vast majority of oil spills in the Niger Delta continueto be caused by crude oil theft or sabotage of pipelines,as well as illegal oil refining. In 2018, close to 90% of thenumber of oil spills of more than 100 kilograms fromSPDC JV facilities was due to illegal activities by third-parties.

In 2018, the SPDC JV experienced an increase in thenumber of sabotage related spills. Regrettably,operational spills also increased (more below on Spilland response data). Regardless of the cause, SPDCcleans up and remediates areas impacted by spills thatcome from its facilities. In the case of operational spills,SPDC also pays compensation to people andcommunities impacted by a spill. Once the clean-up andremediation are completed, the work is inspected, and, ifsatisfactory, approved and certified by Nigeriangovernment regulators.

To reduce the number of operational spills, SPDC isfocused on implementing its ongoing work programme toappraise, maintain and replace key sections of pipelinesand flow lines. Over the last seven years, more than1,300 kilometres of pipelines and flow lines havebeen replaced.

More details on how Shell Companies in Nigeria areresponding, reporting and preventing oil spills in theiroperations can be found at www.shell.com.ng/environment and www.shell.com.ng/security-theft-and-sabotage.

COLLABORATING WITH THE IUCNSPDC has worked with the International Union forConservation of Nature (IUCN) since 2012 to enhanceremediation techniques and protect biodiversity at sitesaffected by oil spills in SPDC’s areas of operation in theNiger Delta.

An independent scientific advisory panel, the Niger DeltaPanel, was set up and based on its input SPDCstrengthened its approach to oil spill response andremediation of soil and groundwater contamination.

In 2018, SPDC and IUCN formed the Niger DeltaBiodiversity Technical Advisory Group, which alsoincludes representatives from the Nigerian ConservationFoundation and Wetlands International, to monitorbiodiversity recovery of remediated sites.

Spill responseand preventionin Nigeria

Wildlife return to the Bodo creeks following the first phase of clean-up activities, a sign of ecosystem recovery.


http://www.shell.com.ng/sustainability/environment

http://www.shell.com.ng/sustainability/environment

http://www.shell.com.ng/media/nigeria-reports-and-publications-briefing-notes/security-theft-and-sabotage

http://www.shell.com.ng/media/nigeria-reports-and-publications-briefing-notes/security-theft-and-sabotage

CLEAN-UP IN BODOIn 2015, SPDC – on behalf of the SPDC JV – and theBodo community signed a memorandum ofunderstanding granting SPDC access to begin the clean-up of areas affected by two operational spills in 2008.As part of this initiative, two contractors were selected toconduct the clean-up, overseen by an independentproject director.

After two years of significant engagement with the Bodocommunity and other stakeholders, managed by theBodo Mediation Initiative, the first phase of clean-upactivities started in September 2017. The clean-upconsists of three phases: removal of free-phase surfaceoil; remediation of soil; and planting of mangroves andmonitoring. The first phase was completed in August 2018and the preparation for phase two has commenced.

We saw further progress in 2018 with vital clean-up workin Bodo, an area affected by oil spills from varioussources, entering its next phase.

Should activities continue uninterrupted, phase two(remediation of soil) is expected to take around twoyears. However, for it to be successful, the repeated re-contamination of cleaned-up sites from illegal third-partyactivities such as crude oil theft and illegal refining,must stop.

CLEAN-UP EFFORTS IN OGONILANDSPDC is working with the relevant stakeholders toimplement the 2011 UN Environmental Programme(UNEP) report on Ogoniland. Over the last seven years,SPDC has taken action on all, and completed most, ofthe UNEP recommendations addressed specifically to itas operator of the joint venture.

The UNEP report recommended the creation of anOgoni Trust Fund with $1 billion capital, to be co-fundedby the Nigerian government, the SPDC JV and otheroperators in the area. The SPDC JV remains fullycommitted to contributing its share of $900 million over

five years to the fund and made $10 million available in2017 to help set up the Hydrocarbon Pollution andRemediation Project (HYPREP), a government-led body. InJuly 2018, the SPDC JV deposited a further $170 millioninto the escrow account to fund HYPREP’s activities,which completes its first-year contribution of $180 million.

HYPREP has issued contract award letters for phasedremediation activities and is aiming for contractors to bein place at sites in early 2019.

SPILLS AND RESPONSE PERFORMANCECrude oil theft from SPDC JV’s pipeline networkamounted to around 11,000 barrels of oil a day (bpd) in2018, an increase from around 9,200 bpd in the previousyear. The increase in 2018 can in part be explained byincreased availability of our production facilities followingthe repair of a major export line in 2017. Since 2012,SPDC has removed more than 1,160 illegal theft points.

The number of operational spills from Shell companies inNigeria increased from 10 in 2017 to 15 in 2018. Thevolume of oil spilled in operational incidents alsoincreased to around 0.4 thousand tonnes compared to0.1 thousand tonnes in 2017. The number of sabotage-related spills in 2018 over 100 kilograms increased to 111from 62 in 2017. Theft and sabotage caused around90% of the number of spills of more than 100 kilogramsfrom SPDC JV pipelines, with the balance beingoperational spills. The increase can in part be explainedby increased availability of our production facilitiesfollowing the repair of a major export line in 2017; crudetheft activities in a pre-election year; and the price ofcrude oil and refined products that is seen as anopportunity for more illegal refining.

At the beginning of 2018, 202 sites required remediation.During the year, 116 sites were remediated and 46certified, while 148 new sites requiring remediation wereidentified. At the end of 2018, there were 234 oil spillsites requiring remediation.


IN THIS CHAPTER44 Climate change and energy transition46 Net Carbon Footprint47 Managing greenhouse gas emissions52 Lower-carbon energy62 Developing technology

Sustainableenergy futureSociety faces a dual challenge: how to makea transition to a low-carbon energy future,while also extending the economic andsocial benefits of energy to everyone onthe planet.

As the global population grows and living standards rise,society will need to meet increasing energy demand witha lower carbon footprint. To play our part in a cleanerenergy future, we will offer customers more low-carbonproducts and services, including lower-carbon fuels fordrivers, and solutions such as forests and wetlands to actas natural carbon sinks.

Shell is determined to help provide more and cleanerenergy solutions. We fully support the Paris Agreementand we are driving our business strategy in the context ofthe energy transition and climate-related risksand opportunities.

Thriving through the energy transition requires workingwith society, including helping to advance the UNsustainable development goals. To help achieve theenergy transition and ensure opportunities to achievebetter living standards for all, the world needs totransform the way it produces and uses energy.

We believe more renewable energy like solar andwind is critical for a cleaner energy future, and thatincreasingly how people live, work and play is going toneed to be powered by lower-carbon electricity. But wealso recognise that not everything can be easily, swiftlyor cost-effectively electrified.

We see continuing, changing roles for oil and gasalongside new energies and new technologies, in co-ordination with complementary approaches like carboncapture and storage and nature-based solutions tomanage the difficult-to-avoid emissions that will remain inthe system for years to come.

Making cities sustainable is one of the world's biggest challenges(see UN sustainable development goals).

CLIMATE CHANGEGovernments took a great stride forward in 2015, whenthey reached agreement in Paris to tackle climate changeby limiting the rise in global average temperatures thiscentury to well below two degrees Celsius above pre-industrial levels. We fully support this goal.

But there are tough challenges ahead that society willneed to address because the transition to a lower-carbonenergy system will require enormous levels of investment,and profound changes in consumer behaviour. For Shell,it could mean significant changes in the long term. Wewill learn, and adapt our approach over time.

EXTERNAL VOICE

The Rocky Mountain Institute seeks to transform globalenergy use to create a clean, prosperous and securelow-carbon future.

“Shell’s 2018 Energy Transition Report outlines thecompany's ambition to reduce the full scope of its NetCarbon Footprint by 50% in 2050, in line withsociety's drive to meet the Paris Agreement. This is abold promise as it looks not just at emissions fromShell’s own operations, but also at the resultantemissions from use of the products the companyproduces and sells. However, current commitments tothe Paris Agreement are inadequate to meet a 2°Cfuture, and mounting evidence makes clear the needto move even faster toward a net-zero energy future.As one of the leading energy multinationals in theworld, Shell will also need to increase its ambitions,seizing the opportunity to lead the way in the energytransition and helping shape global decarbonisationambitions.”

Jules KortenhorstChief Executive Officer, Rocky Mountain Institute

In 2018, we published our second Shell Energy TransitionReport, which sets out how our strategy should allow usto thrive in this energy transition. It also providedinformation about our medium-term resilience andexamples of how we are already active in many of thegrowth areas that will drive our continued success.

WORKING WITH OTHERSTo advance solutions to the energy and climatechallenge, we continue to work with others (seeCollaborations), including the Oil and Gas ClimateInitiative (OGCI), a voluntary CEO-led group takingpractical actions on climate change. The OGCI’s billion-dollar plus investment arm, OGCI Climate Investments,aims to combine the expertise and reach of 13 oil andgas majors with the potential of groundbreaking start-ups(see Methane emissions). We also work with the EnergyTransitions Commission (ETC), whose report MissionPossible: Reaching net-zero carbon emissions from harder-to-abate sectors by mid-century, was published inNovember 2018.

Climate changeand energytransition

44 SUSTAINABLE ENERGY FUTURE SHELL SUSTAINABILITY REPORT 2018

PORTFOLIO RESILIENCEAt Shell, we are confident that our strategy, portfolio andstrong financial framework give us the sources ofresilience to potential changes in the energy system to2030, and the flexibility to adapt as the energy systemchanges over the long term. We are reshaping ourportfolio to provide the energy, and related products andservices, that consumers will need through the transition.

We have set a long-term ambition to reduce the NetCarbon Footprint of our energy products, measured ingrams of carbon-dioxide equivalent per megajouleconsumed, by around 20% by 2035 and by around 50%by 2050, in pace with society.

The key will be to adapt to develop new opportunities inareas that will be essential in the energy transition, andwhere we see growth in demand over the comingdecades. We seek to build a diverse portfolio – bothgeographically and across different parts of theenergy industry.

SHELL SCENARIOSWe have been developing energy-focused scenarios foralmost 50 years, helping generations of Shell leaders,academics, governments and business leaders toconsider possible pathways when making decisions. Theystretch our thinking and help us to make crucial choices intimes of uncertainty and transitions as we grapple withtough energy and environmental challenges.

In 2018, we published our Sky scenario, whichillustrates a technically possible, but challenging pathwayfor society to achieve the goals of the Paris Agreement.Sky builds on previous Shell Scenarios publications,Mountains and Oceans, and is our most optimisticscenario in terms of climate outcomes.

Shell's Sky scenario, published in early 2018, is part of an ongoingprocess used in Shell for over 40 years to challenge executives’perspectives on the future business environment.

Sky results in a balance of net-zero global emissions by2070 and meets the goal of the Paris Agreement, to holdthe increase in the global average temperature thiscentury to well below two degrees Celsius above pre-industrial levels and to pursue efforts to limit thetemperature increase to 1.5 degrees Celsius above pre-industrial levels. If very large-scale reforestation of anarea the size of Brazil is added to the scenario storyline,it would result in limiting warming to 1.5 degrees Celsius.By adopting a modelling approach that is grounded inthe current reality of the energy system and combinedwith a specific long-term goal, Sky is intended to be bothan ambitious scenario and a realistic tool toinform dialogue.

In October, the Intergovernmental Panel on ClimateChange (IPCC) released its report on the impact of 1.5degrees Celsius warming and referenced Sky. The IPCCreport finds that limiting global warming to 1.5 degreesCelsius would require “rapid and far-reaching” transitionsin land use, energy, industry, buildings, transportand cities.

Today’s energy needsThe world gets most of its energy from coal, oil and gas, with around a fifth of all energy used to generate electricity. Energy sources differ acrossindustry, transport and domestic use, which all need to transition to low-carbon options.

Industry - 36%

Electricity generation - 19%

Transport - 31%

Domestic and commercial - 33%Current global energy demand

Source: Shell Scenarios Team Extended Policies and Technologies 2018 (EPTS18) scenario and the International Energy Agency

Oil Coal Natural gas Biomass Nuclear Renewables(including hydro)

Electricity HeatLiquid fuels(including biofuels)

5% 4%

26%

31%6%

28%

4% 2%

22%

39%

10%

23%

2.5% 1%

96.5%

7%5%

26%

23%11%

28%

9%

5%

27%

32%

5%

22%

45SUSTAINABLE ENERGY FUTURESHELL SUSTAINABILITY REPORT 2018

In 2017, Shell announced a long-term ambition to reducethe Net Carbon Footprint of the energy products we sell -a carbon intensity measure that takes into account theirfull life-cycle emissions including customers’ emissionswhen they use these products - in step with society’s driveto meet the goal of the Paris Agreement on climatechange. In December 2018, we also announced ourintention to set short-term Net Carbon Footprint targets.In early 2019, we decided to set a Net Carbon Footprinttarget for 2021 of 2-3% lower than our 2016 Net CarbonFootprint of 79 grams of carbon-dioxide (CO2)equivalent per megajoule. We have linked nearer-termNet Carbon Footprint targets to executive remuneration.

Shell supports the goal of the Paris Agreement of limitingthe rise in global average temperature this century to wellbelow two degrees Celsius above pre-industrial levels. Inpursuit of this goal, we also support the vision of atransition towards a net-zero emissions energy system. Butsociety faces a dual challenge: how to make thetransition to a low-carbon energy future to manage therisks of climate change, while also extending theeconomic and social benefits of energy to everyone.

Meeting this ambition requires changes in the wayenergy is produced, used and made accessible to morepeople while drastically cutting emissions.

We believe that the need to reduce greenhouse gas(GHG) emissions, which are largely caused by burningfossil fuels, will transform the energy system in this century.This transformation will generate both challenges andopportunities for our existing and future portfolio.

By 2050, our ambition is to align Shell’s Net CarbonFootprint with the footprint of the energy mix in the globalenergy system. We aim to reduce the Net CarbonFootprint of the energy products we sell – expressed ingrams of CO2 equivalent per megajoule consumed - byaround 50% by 2050. As an interim step, by 2035, andpredicated on societal progress, we aim for a reductionof around 20% compared with our 2016 level.

We need to go faster than society to achieve thisambition. Our starting point is higher than society’sbecause our portfolio has a different energy mixcompared to the overall energy system. We do not havethe large quantities of nuclear power, hydro power, wind,

solar and large-scale primary biomass that the globalenergy system has.

Our approach to calculating the Net CarbonFootprint covers:

▪ emissions directly from Shell operations (including fromthe extraction, transportation and processing of rawmaterials, and transportation of products);

▪ emissions generated by third parties who supplyenergy to us for production; and

▪ our customers' emissions from their use of our energyproducts.

Also included are emissions from elements of this life cyclenot owned by Shell, such as oil and gas processed byShell but not produced by Shell, or from oil products andelectricity marketed by Shell that have not beenprocessed or generated at a Shell facility. The calculationalso includes biofuels, as well as emissions that we offsetby using carbon capture and storage or natural carbonsinks, such as forests and wetlands.

Chemicals and lubricants products, which are not used toproduce energy, are excluded from the scope ofthis ambition.

To meet the decarbonisation goals of the ParisAgreement, society needs an increasing supply of energyproducts that produce lower or zero greenhouse gasemissions over their full life cycle, to use those productsmore efficiently and to store emissions that cannot beavoided in sinks. Within this framework, our strategy is tokeep increasing the share of low-carbon energy productsin our portfolio, such as natural gas, biofuels, electricityand hydrogen. We will also develop carbon sinks. Bybroadening our focus to the full life-cycle emissions fromthe energy products that we sell to our customers, insteadof solely on our operational emissions, we believe we willbe better aligned with societal need and growingcustomer demand for more energy with lower life-cyclegreenhouse gas emissions.

For more information on these areas, see Managinggreenhouse gas emissions, Lower carbon options andDeveloping technology.

Net CarbonFootprint

Lowering our Net Carbon Footprint

Baseline Operational efficiency

Natural gas shift Renewable

power

BiofuelsElectric mobility

CCS Natural sinks

CO₂


Shell’s Net Carbon Footprint value is determined by firstestimating the emissions intensity for each of the energyproduct supply chains in Shell’s portfolio. The individualintensities are then combined into a single value, with theweighting for each product determined by its salesvolume. Emissions captured in sinks are deducted to givethe final net value. Sales volumes are determined on anenergy basis. Electricity is represented asfossil equivalents.

Shell’s Net Carbon Footprint values for 2016, 2017 and2018 are shown in the table below. We express our NetCarbon Footprint in grams of CO2 equivalent permegajoule (gCO2e/MJ) produced for each unit ofenergy delivered to, and used by, a consumer.

2018 2017 2016Net Carbon Footprint(gCO2e/MJ) 79 79 79

The initial communication of Shell’s Net Carbon Footprintambition in 2017 was based on the 2016 Net CarbonFootprint value and therefore 2016 is taken as thebaseline year for future comparisons. Any previouslypublished Net Carbon Footprint values were preliminaryestimates. The values published in this report are theassured values and replace any previouslycommunicated values.

Lloyd’s Register Quality Assurance Ltd has providedlimited assurance for our Net Carbon Footprint assertionfor 2016, 2017 and 2018. Limited assurance meansnothing has come to the auditor’s attention that wouldindicate that the Net Carbon Footprint data andinformation as presented in the Net Carbon FootprintAssertions were not materially correct.

Shell’s Net Carbon Footprint remained unchangedbetween 2016 and 2018 at 79 gCO2e/MJ. This wasdue to our higher oil product sales (primarily fromgasoline sales in the USA) being balanced by growth inliquefied natural gas (LNG) and electricity sales. Oilproducts have a higher carbon intensity compared to theLNG and electricity sales.

Read more about our Net Carbon Footprint atwww.shell.com/ncf.

DATA SOURCES FOR NET CARBONFOOTPRINTThe Net Carbon Footprint calculation uses productionand product sales data taken from the Annual Report andForm 20-F. Any other product sales data used for the NetCarbon Footprint calculation but not disclosed in theAnnual Report are disclosed in the Sustainability Report.This includes the gas and power data given below.

SALES OF GAS AND POWER PRODUCEDBY THIRD PARTIESGas and power produced or generated by third partiesbut sold by Shell are included in the Net CarbonFootprint Calculation. The figures in the table below showthe global volumes of third-party gas and power sold byShell between 2016 and 2018.

2018 2017 2016Gas (tbtu) 3,246 3,276 3,298Power (TWh) 179 165 169In certain cases, it is not possible to disaggregate sales of Shell and third-party gas volumes. To avoid double counting these sales volumes are notincluded in the above figures.

GREENHOUSE GAS EMISSIONSWe are taking action to manage the emissions from ourown operations and the emissions from the energy weuse in our operations.

Greenhouse gas (GHG) and energy management plansfor facilities and projects help drive our emissionsperformance through a range of actions. These includeusing more energy-efficient equipment and installingpower from renewable sources, and considering thepotential for carbon capture and storage in the design ofour new and largest projects (see Energy efficiency in ouroperations).

For example, the Moerdijk chemicals site in theNetherlands has installed a solar power plant with apeak capacity of around 27 megawatts from 76,000solar panels, comparable to the electricity use of about9,000 Dutch households.

The Moerdijk solar power plant in the Netherlands

GREENHOUSE GAS MANAGEMENTGHG and energy management plans must include thesources of GHG emissions, as well as a forecast ofexpected emissions at the site for at least 10 years.

Projects under development that are expected to have amaterial GHG footprint must meet carbon intensityperformance standards or industry benchmarks.

To assess the resilience of proposed projects, weconsider potential costs associated with operationalGHG emissions. Consistent with our desire to stay in stepwith society’s progress towards the goals of the ParisAgreement, in 2018 we moved away from using a flatproject screening value (PSV) of $40/tonne of carbondioxide (CO2) equivalent to country-specific estimates offuture carbon costs. These estimates were developedusing the current Nationally Determined Contributionssubmitted by countries as part of the Paris Agreement.Accordingly, we believe they more accurately reflectsociety’s current implementation of the Paris Agreementrather than a flat $40/tonne PSV. By 2050, our estimatesfor some countries increase to $85/tonne of GHGemissions. For more details, see Climate change andenergy transition in our Annual Report.

Shell has also developed and implemented acomprehensive CO2 and energy managementinformation system (CEMIS) that supports our facilities, forexample, by analysing real-time data to highlightmaintenance gaps and monitor performance. CEMIS isprimarily deployed in liquefied natural gas and targetedUpstream facilities.

Managinggreenhouse gasemissions


http://www.shell.com/energy-and-innovation/the-energy-future/what-is-shells-net-carbon-footprint-ambition/faq



https://reports.shell.com/annual-report/2018/strategic-report/climate-change-and-energy-transition.php

https://reports.shell.com/annual-report/2018/strategic-report/climate-change-and-energy-transition.php

GREENHOUSE GAS EMISSION PERFORMANCEShell tracks emissions released by our facilities and worksto reduce emissions from our operations. We report ourGHG emissions in line with the recommendations of theIntergovernmental Panel on Climate Change. Shell’sHealth, Safety, Security, Environment and SocialPerformance (HSSE&SP) Control Framework definesstandards and accountabilities at each level of theorganisation and sets out the procedures people arerequired to follow.

Direct greenhouse gas emissionsmillion tonnes CO2 equivalent100

0

50

10 12 1714 16 1809 11 13 15

Our direct GHG emissions decreased from 73 milliontonnes of CO2 equivalent in 2017 to 71 million tonnesof CO2 equivalent in 2018.

GHG movements from 2017 to 2018 [A]million tonnes CO2 equivalent

85

90

75

80

70

AcquisitionsReduction activities [B]

Emissions Change in outputDivestments and other reasons

2017 2018

a

bc d e85

82(1.2)

1.9

(5.1)

1.4

abc

de

[A] Direct and indirect GHG emissions from imported energy[B] Does not include 1 million tonnes of CO2 captured and sequestered byour Quest CCS project in Canada in 2018

The main reasons for the decrease in our greenhouse gasemissions in 2018 were divestments (for example inArgentina, Canada, Gabon, Iraq, Malaysia and the UK).These decreases were partly offset by inclusion of theassets previously operated by the Motiva Enterprises LLCjoint venture in our data for the full year in 2018,increased production at the Pearl gas-to-liquids plant inQatar and the start-up of the Prelude floating liquefiednatural gas facility in Australia.

In 2018, more than 55% of our direct greenhouse gasemissions came from our refineries and chemical plants.The production of oil, gas and gas-to-liquids productsaccounted for around 40% of our greenhouse gasemissions, and our shipping activities accounted foraround 3%. We continue to work on improvingoperational performance and energy efficiency tomanage greenhouse gas emissions.

The indirect greenhouse gas emissions associated with thegeneration of the energy we purchased (electricity, heatand steam) were 11 million tonnes on a CO2-equivalentbasis in 2018 compared with 12 million tonnes CO2equivalent in 2017. The decrease was in part driven bythe exclusion of oil sands mining when operatorship wastransferred to another company, Canadian Natural, in

2017. These emissions were calculated using a market-based approach, as defined by the World ResourcesInstitute Greenhouse Gas Protocol.

We estimate that the CO2 equivalent emissions from theuse of our refinery and natural gas products by otherswere around 599 million tonnes in 2018. Read moreabout our Net Carbon Footprint at www.shell.com/ncf.

We use the previous year’s GHG emissions as our baseyear to compare our performance over time. To maintaina meaningful and consistent year-to-year comparison, wemay need to recalculate the base year if it is affected bymajor changes, for example, if significant emissions-generating activities are transferred to another companyas a result of a divestment. Our 2017 base year GHGemissions did not change by more than 5% in 2018 andtherefore the base year emissions have notbeen recalculated.

Read more at www.shell.com/ghg.

METHANE EMISSIONSMethane is a potent greenhouse gas. When it is releasedinto the atmosphere, it has a much higher global warmingimpact than carbon dioxide (CO2). Efforts to addressclimate change therefore require the industry to reduceboth deliberate and unintended methane emissions fromthe gas value chain, from production to thefinal consumer.

Methane from the flaring and venting of gas (includingequipment venting) in our upstream oil and gasoperations was the largest contributor to our reportedmethane emissions in 2018.

Methane leaks in the natural gas system reduce the lower-carbon benefits of gas. For example, a small number ofleaks that account for a high percentage of methaneemissions could significantly reduce the overallenvironmental benefits of natural gas. Limiting leaks fromShell’s own operations will contribute to our ambition tocut our Net Carbon Footprint. At the same time,preventing or reducing methane leaks makes goodcommercial sense because methane is the largestcomponent of natural gas – the less that leaks, the morewe can sell to market.

Infrared cameras can be used to detect methane leaks.

Shell has formed an industry coalition, supported byorganisations like the Environmental Defense Fund, UNEnvironment, leading universities and the World Bank, todevelop a set of methane guiding principles. InNovember 2017, eight companies, including Shell,signed up to these principles. In 2018, we succeeded inencouraging a further 10 companies to sign up. Theprinciples focus on ways to reduce emissions throughoutthe gas industry – from production to the final consumer.


http://www.shell.com/energy-and-innovation/the-energy-future/what-is-shells-net-carbon-footprint-ambition/faq

http://www.shell.com/ghg

EXTERNAL VOICE

The Environmental Defense Fund seeks to createsolutions to the most serious environmental problemsthrough science, economics, law and private-sectorpartnerships.

“Shell’s industry-leading target makes clear that therace to combat methane emissions is on. Strongcommitments like this suggest to investors,governments and business partners alike that anoperator is serious about its positioning in a cleanerenergy economy. Company leadership on methanedoes not stop with setting targets. By engaging jointventure partners and strongly supporting tightenedmethane regulation, Shell is making importantcontributions to progress industry-wide.”

Ben RatnerSenior Director, EDF+Business, Environmental DefenseFund

In 2018, Shell also announced a target to keep our ownmethane emissions intensity, for both oil and gas, below0.2% by 2025. This target covers all Upstream andIntegrated Gas oil and gas facilities for which Shell isthe operator.

The intensity baseline and target are presented aspercentage figures, which represent the estimated amountof methane emissions for Shell’s operated gas and oilassets as a percentage of the amount of the total gasmarketed or, for those assets that have no marketed gas,the amount of marketed oil and condensate (e.g. assetsthat reinject produced gas).

The methane emissions include those from fugitives,venting and incomplete combustion, for example in flaresand turbines. In 2018, our methane intensity was 0.08%for assets with marketed gas and 0.01% for assets withoutmarketed gas. Shell’s methane emissions intensity in 2018ranged from below 0.01% to to 0.9%.

Our methane emissions are calculated using the bestcurrently available methods: a combination of standardemission factors (established emissions rates per throughputor per piece of equipment), engineering calculations andsome actual measurements. There is data uncertaintyassociated with methane emissions data quantification, andthese figures may change based on data reporting.

To reduce these uncertainties, our Upstream andIntegrated Gas businesses are rolling out methaneimprovement programmes that focus on further improvingdata quality and reporting, and on our continuedimplementation of leak detection and repair programmes(LDAR) and methane abatement opportunities. By 2025,all Shell-operated assets are expected to haveimplemented more robust quantification methodologies.

We have a range of technologies and work practices inplace to help find and address unintended – or fugitive –methane emissions in our operations. This includes next-generation technologies like drones. We also implementflaring and venting reduction programmes.

We use LDAR programmes, for instance, in Australia,Canada, the Netherlands, Trinidad and Tobago, Tunisiaand the USA, and this approach will be extended acrossShell globally.

We also collaborate with technology developers, civilsociety groups and academia to test and develop newdetection technologies that can provide more accurateand continuous data and enable quicker repair of leaks.In July 2018, Shell launched a project with Avitas Systemsto test drone-based remote inspection of facilities in thePermian Basin.

A project team at Shell’s Groundbirch facility(Shell interest 80%), in British Columbia, Canada, hasintroduced a new design of well pad which includeselectric valve actuators instead of pneumatic ones toreduce methane emissions from the well site. The newdesign is also expected to increase production capacityby 40% and decrease costs by 15%. The first new well-pad came on-stream in January 2018.

Workers at a Groundbirch well site in Canada

Shell is one of 13 members of the Oil and Gas ClimateInitiative (OGCI), a CEO-led initiative to lead theindustry’s response to climate change. One of OGCI’sfocus areas is methane management. In September 2018,OGCI announced a target to reduce the collectiveaverage methane intensity of its members’ aggregatedupstream gas and oil operations by one fifth to below0.25% by 2025, with an ambition to achieve 0.20%,corresponding to a reduction of one-third.

OGCI is supporting independent research, for example,with the UN Climate and Clean Air Coalition and theEnvironment Defense Fund, to better understand andimprove measurement of methane emissions in differentregions and types of operations around the world. In2018, OGCI’s investment arm, OGCI ClimateInvestments, invested in methane leak detection andprevention technologies, including GHGSat, which usessatellites to provide accurate, low-cost greenhouse gasmonitoring data and services covering any facility inthe world.


METHANE EMISSIONS PERFORMANCEIn 2018, our total methane emissions were 92 thousandtonnes compared with 123 thousand tonnes in 2017, inpart driven by divestments (for example in Gabon, IraqMalaysia) in 2017 and 2018 and the exclusion of oilsands mining when operatorship was transferred toanother company, Canadian Natural, in 2017. Methaneemissions were less than 5% of Shell’s greenhouse gasemissions on a CO2-equivalent basis. More than 60% ofour reported methane emissions in 2018 came fromflaring and venting in our upstream andmidstream operations.

Methane (CH4) emissionsthousand tonnes150

0

100

50

10 12 1714 16 1809 11 13 15

2018 Methane emissions by source

a

b

c

d

19%

48%

18% 15%

ab

cd

CombustionFlaring

Process and ventingFugitive

We report our methane emissions in accordance withapplicable regulations and industry standards. We alsoengage in industry-wide work on developing moreaccurate reporting methods, such as through IPIECA, theglobal oil and gas industry association for environmentaland social issues.

CARBON CAPTURE AND STORAGEShell invests in carbon capture and storage (CCS)projects, which use a combination of technologies tocapture and store carbon dioxide (CO2) deepunderground. We also work with partners to find newways of using CO2 once it has been captured.

We believe CCS must play a significant role in the globalclimate response. CCS projects are happening aroundthe world and the technology is proven but more projectsneed to be built.

The Intergovernmental Panel on Climate Change (IPCC)has said in its latest report in 2018 that the early scalingup of industry CCS is essential to achieving the stringentglobal warming target of 1.5 degrees Celsius. CCStechnology can capture CO2 from existing powerinfrastructure and heavy, energy-intensive industries likecement and steel.

CCS IN CANADAWe operate the Quest CCS project (Shell interest 10%)in Canada, which captures and stores CO2 from theScotford Upgrader. In its first three years of operations,Quest captured and safely stored more than 3 milliontonnes of CO2, and achieved this ahead of schedule.

Technology developed by Shell Cansolv is used tocapture both sulphur dioxide and CO2 at SaskPower’sBoundary Dam power station in Saskatchewan, Canada.We continue to support SaskPower to improve theapplication of the technology.

DEVELOPING CCSWe are working with our partners to develop new waysto capture CO2 from exhaust gases from industrialfacilities. In 2018, we helped launch a pilot project at abiomass power plant in Austria to separate CO2 fromflue gases in a lower-cost way. Once captured, the CO2can be used as, for example, a fertiliser in agriculture. Weare working on the project with Wien Energie, the utilitythat operates the power plant; TU Wien, whichdeveloped and ran the pilot project; the University ofNatural Resources and Life Sciences; and Bertsch, whichbuilt the project.

At the Technology Centre Mongstad (TCM), Shell –together with the Norwegian government, Equinor andTotal – is undertaking further research and developmentinto CCS to help reduce the technology's costs. In 2017,we reaffirmed our involvement in continued testing atTCM until 2020. Shell and its TCM partners are alsoworking on a full-scale project that includes the capture ofCO2 from industrial facilities in Eastern Norway. TheCO2 would then be transported by ship to an onshorereceiving plant before being injected into an offshoresaline aquifer.

In 2018, the Oil and Gas Climate Initiative investment-arm, Climate Investments, announced that it is enteringinto a strategic partnership with Shell and other oil andgas companies to analyse the potential development ofthe UK’s first commercial full-chain carbon captureutilisation and storage (CCUS) project in Teesside.Climate Investments also invested in three innovativecompanies involved in CCUS, including SolidiaTechnologies, which has developed systems forproducing lower-emissions cement and concrete curedwith CO2 rather than water.

We also announced we will provide a monetarycontribution to support the work of the InternationalEnergy Agency over the next three years to enable theagency to increase its focus on partnerships, and morespecifically, work with its partner countries to identify howto accelerate CCUS deployment.

We are involved in the Gorgon CO2 injection project(Shell interest 25%) in Australia, which is due to start up in2019. It will be the world’s largest CCS operation whencompleted. The project plans to separate and injectbetween 3.4 million and 4 million tonnes of reservoir CO2each year. Over the life of the project, it is expected thataround 100 million tonnes of reservoir CO2 will becaptured and stored. During the pre-start up andcommissioning checks of the injection project, some issueswere identified that are being rectified before injectionbegins.


How carbon capture and storage worksSee what is involved in the process of capturing and storing carbon dioxide deep underground

Source: International Energy Agency's Energy Technology Perspectives 2017

1

2

3

4

1 3 42CaptureCO2 capture separates CO2 from gas, before it is emitted, using a chemical solvent. The captured CO2 is separated from the solvent and compressed into a liquid form for transport.

TransportCO2 is generally pumped through a pipeline, taking the CO2 from the industrial site where it has been produced, to its storage site which may be onshore or offshore.

StorageCO2 is injected deep underground into the microscopic spaces in porous rocks. A layer of impermeable rock, called a cap rock, lies directly above the porous rocks ensuring that the CO2 remains there permanently.

Measuring, monitoring and verificationMonitoring of storage sites takes place within the storage reservoir, as well as at the injection well, where sensors can detect small changes in pressure or CO2 levels. In addition, a number of monitoring technologies can be incorporated within the geosphere, biosphere and atmosphere surrounding the storage site to make sure the CO2 is permanently stored.

14%

CCS contributionThe IEA considers that CCS, as part of a portfolio of actions, can account for 14% of total energy-related CO2 reductions needed by 2060.

2000m

NATURE-BASED SOLUTIONSNature will play an important role in the transition to alower-carbon world. Using nature to capture carbon fromthe atmosphere is an immediate opportunity to helpbridge the gap until other low-carbon solutions aredeployed at scale, or to compensate for emissions whichcannot be avoided.

Nature-based solutions are expected to be one ofShell's tools to reduce the Net Carbon Footprint of ourenergy products by around half by the middle ofthe century.

We will be working increasingly with nature, such as forests, tocreate sinks for emissions that are hard to avoid.

Nature-based projects typically involve the protection orredevelopment of natural ecosystems such as forests andwetlands, allowing those ecosystems to capture andstore more carbon on our behalf. These projects, whichalso support local communities and conserve biodiversity,generate carbon-emission rights – each right representingone tonne of carbon dioxide not emitted – that then canbe bought by energy consumers around the world. Weoffer carbon offsetting to our business customers in somecountries including Belgium, France, Germany,Luxembourg, the Netherlands and Hong Kong.

Most nature-based projects we work with are certifiedby the Verified Carbon Standard, currently the largestvoluntary greenhouse gas certification programme, andthe Climate, Community & Biodiversity Standard, whichverifies that projects not only address climate change, butalso support local communities and conserve biodiversity.One project we are involved with is the Cordillera AzulNational Park project in Peru, which is supported andfinanced by the natural capital investment fund, theAlthelia Climate Fund, and protects 1.5 million hectares ofthreatened forest.

Over the last decade, we have worked with The NatureConservancy to find new ways to address global andlocal environmental challenges. This includes using theorganisation’s research on nature-based solutions to helpus develop business strategies that reduce the NetCarbon Footprint of our products (see Environmentalpartners).


SHELL AND EMISSIONS TRADINGOur environmental product trading business, one of thelargest in the world, has been operating in complianceand voluntary emissions markets since 2003. The team isactive in key emissions markets globally and has fourmain hubs in London, Singapore, Shanghai andSan Diego.

We completed the first trade on the European UnionEmissions Trading Scheme (EU ETS) in 2003 and havebeen an active participant in the European CO2 marketfor the past 16 years. Today, Shell is active in the EU ETS,Western Climate Initiative, Regional Greenhouse GasInitiative, Chinese pilot markets in Shanghai, Beijing andGuangdong, South Korean ETS, New Zealand ETS andthe Australian Safeguard Mechanism.

We also work with a carefully selected group ofenvironmental project developers around the world tooffer our customers voluntary carbon credits. We ensurethat our selected projects comply with high-qualityaccreditation standards. In this way, we are building aglobal portfolio of nature-based projects through whichwe can help our customers to offset carbon emitted fromthe fuels they use.

Shell’s global environmental products trading business isalso working with businesses across Shell to identifyopportunities to support the reduction of our own NetCarbon Footprint.

Our experience, partnerships and technical know-howcan help find new ways to provide energy thatpeople need and want – and do this responsibly to helpshape a more sustainable energy future.

Natural gas will play a key role in the transition to alower-carbon global energy system over the next fewdecades. It is likely to be the cleanest source of energyfor parts of the economy where it is hard to reduceemissions, such as heavy-duty transport and the steel andcement industries. When used instead of higher-carbonfuels such as coal and diesel for generators, it can help tomeet increasing demand while lowering greenhouse gasemissions and air pollution.

Our New Energies business, established in 2016, is alsostrengthening the way we approach lower-carbonalternatives through its focus on new fuels and power.

Transport accounts for nearly 30% of the world’s totalenergy use and around a quarter of global energy-related carbon dioxide (CO2) emissions. This means thata range of different fuels and vehicle technologies will berequired to meet the growing demand for mobility, whilereducing emissions. Shell is investing in a range of lower-

carbon energies including biofuels, hydrogen fortransport, and charging for electric vehicles.

We believe that low-carbon biofuels will continue to playa valuable part in reducing CO2 emissions in thetransport sector in the coming decades, provided theirproduction is managed in a responsible way.

Hydrogen also has the potential to be an important low-carbon transport fuel. Hydrogen fuel-cell electric vehiclesproduce no greenhouse gases from the exhaust pipe –the only emission is water vapour.

Electric mobility will also help meet growing demand fortransport in a lower-carbon world. And Shell is exploringhow best to serve an increasing number of electricvehicle drivers, both in and beyond our service stations.

Reducing emissions is not just about developing newtechnologies. It is also about making establishedtechnologies more efficient. In fact, according to theInternational Energy Agency's Perspectives for the EnergyTransition: The Role of Energy Efficiency report, energyefficiency can deliver up to 35% of what is needed by2050 to keep global warming below two degrees

Lower-carbonenergy

New Energies – investments, acquisitions and ventures

Energy solutions Digital businesses Energy access Wind Solar New fuels Shell Ventures * Minority investment** Product launch date

2001–2015

US 5 onshore wind USA, since 2001

NoordzeeWind Netherlands, since 2002

Raízen advanced biofuels Brazil, 2011

Hydrogen stations Germany, 2015

New Energies business established

2016

Borssele 3&4 Netherlands

FitCar** USA

Sense Home Monitor USAKite Power Systems UK

2017

First Utility UK

Solar Now* Uganda/KenyaSteamaco* Africa/Asia

Stockton on-site USA

Fare Pilot** UKConnected Freight** Philippines

NewMotion EuropeHydrogen stations UK & CaliforniaSBI BioEnergy CanadaIH2 India

Sunseap SingaporeInnowatts USAGreentown Labs USA

2018

Silicon Ranch* USACleantech Solar* SingaporeMoerdijk solar Netherlands

Atlantic Shores Offshore Wind JV USAMayflower Wind Energy JV USATetraSpar* Norway

sonnen* GermanyGI Energy USARheinland Hydrogen Electrolyser GermanyShell Energy Inside** USA

Husk Power* India/TanzaniaSunFunder* Kenya

HyET NLAxiom Exergy USAAmple USA

Light and heavy-duty hydrogen stations Canada and USAJunction City biogas plant USA


Celsius. At Shell, we are continuing to develop a range oflubricants and other products which, because theyprovide greater energy efficiency, can reduce ourcustomers’ CO2 emissions.

Electricity, now the fastest growing part of the globalenergy system, is a crucial element in the ongoingtransition to a lower-carbon world. We aim to makeelectricity a significant business for Shell, one that in thefuture could sit alongside oil, gas and chemicals. Thismeans being involved at almost every stage of theprocess, from generating electricity, to buying and sellingit, to supplying it directly to customers. Our approach toproviding electricity involves developing lower-carbonenergy sources, such as wind and solar, along withnatural gas.

Shell aims to help make electricity available to morepeople. Having a reliable supply of energy is critical toeconomic and social development but, globally, around 1billion people are without access to electricity. In 2018,we outlined our new ambition: to bring a reliableelectricity supply to 100 million people in the developingworld by 2030. We continue to work on developing alonger-term strategy to achieve this ambition.

NATURAL GASNatural gas – the cleanest-burning hydrocarbon –comprises about half of Shell’s total production and is keyto our aim to provide more and cleaner energy. Usingnatural gas for power generation, for example, can playa key role in developing a cleaner global energy system.

Gas is one of the few energy sources that can be usedacross all sectors of the global economy. It can be usedto generate electricity, provide heat for essential industrialprocesses and homes, as well as fuel for heavy-duty roadtransport, shipping and rail. Natural gas emits between45% and 55% less greenhouse gas emissions than coalwhen used to generate electricity, according to theInternational Energy Agency.

Gas can also act as a partner for intermittent renewableenergy, such as solar and wind, by helping to maintain asteady supply of electricity, because gas-fired plants canstart and stop relatively quickly.

MEETING DEMAND FOR LNGAs one of the industry leaders in liquefied natural gas(LNG), we sell LNG to customers in over 25 countries.

In 2018, we took a final investment decision with our jointventure partners on the LNG Canada project, which isnow being built. The project will improve the availabilityand affordability of natural gas for Asian markets. LNGCanada is projected to have one of the lowestgreenhouse gas emission profiles for a project of its kind,in part because of the decision to use hydro-electricpower at the site.

LNG can also be used as a fuel for heavy-duty transportand burns more cleanly than diesel. In the shippingindustry alone in 2018, there were around 200 sea-goingvessels powered by LNG. The International MaritimeOrganization has agreed to limit sulphur oxide andnitrogen oxide emissions from all ships from January2020. LNG fuel can help ship operatorsreduce emissions.

NNaaturtural gaal gass

We provide 3% of the world’snatural gas

LNLNG shippingG shipping

We manage one of the world’slargest fleets of LNG carriers

The Cardissa LNG bunker vessel refuels the Gagarin Prospect tanker at the Gate terminal in Rotterdam, the Netherlands.


Our LNG Canada joint venture (Shell interest 40%)and Shell Canada's Groundbirch asset in BritishColumbia, Canada, illustrate our firm belief that the keyto success is engaging constructively with localcommunities and contributing to theireconomic development.

We have been operating in Canada since 1911. Today,we are working with our partners to responsibly delivernatural gas by keeping safety, communities and theenvironment at the heart of a major new liquefied naturalgas (LNG) project and connected business activities.

In October, 2018, LNG Canada, the first large-scaleLNG export project in the country, moved into itsconstruction phase. LNG Canada is a non-operated jointventure (JV) between Shell, Petronas, PetroChina,Mitsubishi and Korea Gas. Gas from north-eastern BritishColumbia will be transported through the planned third-party 670-kilometre Coastal GasLink pipeline. It will thenbe liquefied for export from the community of Kitimat onthe west coast.

Shell secondees, who make up around 75% of LNGCanada's employees, are working in a range of areas,including in technical, financial and commercial roles.Safety is central to delivering the project, with everyemployee and contractor required to meet Shell’sstandards, including following our 12 Life-Saving Rules.The JV partners have also agreed to adopt our Health,Safety, Security, Environment and Social PerformanceControl Framework.

Kitimat

Groundbirch

Canada

ENGAGING COMMUNITIESThe liquefaction plant at Kitimat in British Columbia iswithin the traditional territory of the Haisla First Nation. Itwill be built on an industrial site near an existing port,transport links and power supplies. Since 2012, the LNGCanada team has worked closely with local communities,First Nations and governments to better understand howthe project could help achieve their economic,environmental and community aspirations. The team’sefforts led to strong support from key stakeholders, forexample, from 25 elected First Nations bands along thepipeline route, at the facility and along the shipping route.

Deliveringnatural gasin Canada

The LNG Canada team has worked closely with local communities, First Nations and governments to better understand how the projectcould help achieve their economic, environmental and community aspirations.


https://www.shell.com/media/news-and-media-releases/2018/shell-gives-green-light-to-invest-in-lng-canada.html

https://www.shell.com/media/news-and-media-releases/2018/shell-gives-green-light-to-invest-in-lng-canada.html

Each year, LNG Canada invests in a range of communityprogrammes. This investment includes support for acommunity foundation and a training fund designed tosupport apprenticeships and industry training, with afocus on women.

Building the facility and pipeline is expected to create10,000 jobs. We expect around 20,000 people willhave worked in some way for LNG Canada by 2025.

Many of the local opportunities will come in the form ofcontracts ranging from civil work, such as layingfoundations, to operating and maintaining the facilities.

PROTECTING THE ENVIRONMENTAvoiding impacts on biodiversity and ecosystem servicesis a central aim of LNG Canada. Where this is notpossible, the aim is to minimise impact and help restoreimpacted habitats or ecosystems.

Each JV participant will be responsible for providing itsown natural gas supply and will individually market itsshare of LNG. Shell Canada’s Groundbirch operations innorth-east British Columbia are positioned to provide themajority of Shell’s equity share of natural gas from morethan 500 producing wells and four natural gasprocessing plants.

At Groundbirch, we work with local communities tominimise our environmental impact. Since 2014, we havereclaimed 60 hectares to their natural landscape, in partthrough a collaboration with the local Twin Sisters nativeplants nursery. Twin Sisters, established by the SaulteauFirst Nations and West Moberly First Nations, enables usto reclaim the land using local traditional knowledge andnative plant species. Restoring the habitat alsocontributes to the success of conservation efforts byencouraging natural wildlife migration and behaviour.

At Groundbirch, we work with local communities to reclaim land toits natural landscape.

As part of its design, LNG Canada developed a series ofenvironmental management plans to avoid, manage ormitigate potential effects on the environment. Theproject’s wetland compensation plan includesestablishing 17 hectares of wetlands to help balance theproject's physical presence. The plan includes hiring anenvironmental specialist contractor to restore, enhance orcreate another 65 hectares of wetlands.

LNG Canada also plans to offset project-related impacton fish and fish habitats by maintaining or increasing theavailability and quality of rearing, migratory and winterhabitats for the local salmon, trout, and char populations.

MANAGING EMISSIONSLNG Canada’s export plant has been designed toachieve the lowest carbon intensity of any large-scaleexport facility operating in the world today, achievedthrough a combination of using renewable hydropowerand highly efficient gas turbines. It also supports Shell’sambition to reduce the Net Carbon Footprint of theenergy products it sells.

Groundbirch has already reduced greenhouse gasemissions by about 25% over the past three years. Thisresult is due to a voluntary leak detection and repairprogramme that uses methods such as infrared camerasto identify and repair fugitive methane leaks. We are alsotesting several methane detection technologies to providereal-time monitoring.

By electrifying its main gas plants in 2016, Groundbirchreduced emissions equal to removing about 37,500 carsfrom the road each year. We have also installedspecially-designed multi-well pads with electric actuatortechnology to significantly reduce methane emissions. Itnow takes around 700-1,000 watts to run these wellpads, about the same as powering a hair dryer. By usingnatural fuel gas instead of diesel on rigs, we have cutgreenhouse gas emissions in our drilling and completionsoperations by 28% since 2014.

At the end of 2018, Shell and six other Canadian naturalgas producers came together to announce $3 million infunding through the Natural Gas Innovation Fund (NGIF)to advance clean technology solutions to reducegreenhouse gas emissions in natural gas production.

WATER USEWe aim to minimise our use of fresh water and, whereverpossible, recycle and reuse water from our activities. In2012, Shell collaborated with the City of Dawson Creekto build a reclaimed water facility. The Dawson CreekReclaimed Water Project virtually eliminated the need todraw on fresh water for our Groundbirch operation. Theproject also treats a volume of municipal waste waterthat was previously released into the Dawson Creek to astandard suitable for industrial and municipal uses.

In 2018, we started testing a technology to dehydratewaste water and evaporate clean water back into thehydrologic cycle, reducing waste water volumes fordisposal. Today, around 97% of the water used in ourGroundbirch operations is recycled.

In addition, water pipelines built throughout our field helpus distribute water between our Groundbirch sites,minimise trucks on the road, reduce emissions, noise anddust, and improve road safety.

Workers prepare to sample water in pasture landnear Groundbirch operations.


https://www.shell.ca/en_ca/about-us/projects-and-sites/groundbirch/dawson-creek-reclaimed-water-project.html

https://www.shell.ca/en_ca/about-us/projects-and-sites/groundbirch/dawson-creek-reclaimed-water-project.html

ELECTRICITY

ELECTRICITYWe aim to make electricity a major business for Shell,one that could sit alongside oil, gas and chemicals. Thismeans being involved at almost every stage of the powersupply system, from generating electricity, to buying andselling it, to supplying it directly to customers.

Electricity from renewable sources, such as wind andsolar, can be combined with the electricity producedfrom natural gas. Together, they can provide cleanersources of power.

We are expanding our existing electricity businesses andmoving into new areas, building on the strength of bothour brand and our global presence.

Shell already plays a significant role as an electricitytrader and wholesale supplier in North America. Wemanage more than 10,000 megawatts (MW) of powergeneration in the continent, enough to power around 5million homes, with more than a third coming fromrenewables. We have a growing trading business inEurope and we are entering other markets. For example,in 2018, Shell Energy Australia executed our first powertrade at the Australian Securities Exchange and we arealso preparing to start an electricity trading business inJapan in 2019.

In the USA and Europe, we are involved in electricitygeneration through wind and solar projects.

For the residential market, we are starting to supplydirectly to customers and providing charging points toelectric vehicle drivers both in and outside ourretail stations.

In addition, we are developing ways to provideelectricity to those who have unreliable access, or noneat all. Shell’s ambition is to provide a reliable electricitysupply to 100 million people in the developing world by2030. We continue to work on developing a longer-termstrategy to achieve this ambition.

WINDWe first entered the wind business in 2001, in the USA.Today, we have five onshore wind farms in operation inthe USA, and one offshore wind farm in operation in theNetherlands. We also have interests in three windprojects under development – two in the USA and one inthe Netherlands. Once built, these projects will have atotal installed capacity of more than 5 gigawatts (GW).

Shell has five onshore wind farms in operation in the USA.

The Netherlands wind project is led by the Blauwwindconsortium (Shell interest 20%), which will build andoperate Borssele III and IV wind farms. These wind farmsare designed to have a total installed capacity of 731.5MW, enough to power around 825,000 Dutchhouseholds. Half of the electricity generated from thiswind farm will be marketed by Shell Energy EuropeLimited to supply customers with renewable power.

In 2018, we made a move into US offshore wind,announcing two joint ventures to develop wind farms offNew Jersey and Massachusetts, both 50% Shell-owned,which would have a total installed capacity of4 gigawatts.

SOLARIn 2018, we acquired a 44% interest in Silicon RanchCorporation, a US developer, owner and operator ofsolar assets; this includes about 1.4 GW capacity ofoperational or contracted projects.

Shell has also acquired a 49% interest in CleantechSolar, which provides solar power to commercial andindustrial customers across South East Asia and India. ThisSingapore-based solar developer owns more than 120solar power projects, with most in operation and the restunder construction or development. In total, itsinstallations, once fully built, represent up to 200 MWof power.

The Silicon Ranch solar power project is located in Nashville,Tennessee, USA.


We have also invested in the Sunseap Group throughour corporate venturing arm Shell Ventures. Sunseap hasaround 160 MW of distributed solar contracts, anelectricity retailer licence in Singapore and large-scalesolar projects.

In the UK, we increased our position in renewable powerin 2018 after Shell Energy Europe signed a five-year dealwith British Solar Renewables to buy all the electricitygenerated by the Bradenstoke solar power plant inWiltshire. The plant generates around 65 mega-watthours a year.

Shell Energy Europe also signed a five-year deal withOctopus to buy electricity from its 70.5 MW portfolio ofItalian solar assets.

In the USA, Shell Energy North America signed a 15-yearagreement to purchase solar power from EDFRenewables North America in California and a 12-yearagreement to purchase solar power from the Phoebesolar photovoltaic project in Texas.

We are starting to deploy solar photovoltaic in our ownoperations, including offices, retail sites, distributionterminals, refineries and offshore installations. InCalifornia, USA, for example, we have delivered aphotovoltaic project to provide on-site solar power to theStockton fuels distribution terminal. Shell is alsodeveloping a solar power plant at its Moerdijk chemicalssite in the Netherlands.

DISTRIBUTED AND HOUSEHOLD ENERGYIn 2018, we started supplying energy to residentialcustomers directly in the UK for the first time when weacquired First Utility (Shell Petroleum Company Limited),an energy provider that supplies around 720,000homes. It is also active in Germany.

The residential market is changing fast, with newtechnologies such as smart meters, smart thermostats andother intelligent appliances. These devices allow peopleto monitor and control their consumption better – forinstance, by programming large appliances to run at atime when electricity is cheaper. This helps to balance theelectricity grid at peak times when supplies aremost stressed.

One further trend is known as distributed energy. This iswhen customers, big and small, begin to generate theirown on-site power through solar panels or wind turbines,store it and potentially redistribute it back into the grid.

In 2018, Shell acquired a majority interest in GI Energy, aUS company that focuses on the integration of distributedenergy resources. GI Energy builds microgrids and on-siteenergy systems for commercial and industrial customers.In February 2019, we acquired sonnen, which providessmart energy storage systems and innovative energyservices for households.

ACCESS TO ENERGYAround 1 billion people live without access toelectricity and a billion more only have access tounreliable power supplies.

In 2018, we outlined our new ambition to provide areliable electricity supply by 2030 to 100 million peoplein the developing world. We plan to do this by investingin commercial businesses and by supporting innovation.In this way, we help to achieve the UN’s sustainabledevelopment goal 7, which calls for access to affordable,reliable, sustainable and modern energy for all. Wecontinue to work on developing a longer-term strategy toachieve our ambition.

We see a commercial opportunity to invest in energyaccess solutions in Africa and Asia. Our approachfocuses on proven technologies and business models thatcan be deployed on a large scale. These include mini-grids and decentralised solar energy systems that canpower homes, businesses and communities.

We have invested in several companies that provideelectricity systems to residential, commercial andindustrial sectors.

In 2018, we invested in Husk Power Systems, a mini-gridcompany with experience in India that has recentlyexpanded into Tanzania. Husk uses a hybrid solarphotovoltaic and biomass gasification system withbattery storage to provide reliable and affordableelectricity 24 hours a day to customers on a pay-as-you-go basis.

Husk Power Systems serves a mix of rural householdsand businesses.

We have invested in SolarNow, a business whichprovides decentralised solar energy solutions to unservedand underserved customers in East Africa. SolarNowoperates through a network of branches in Kenya andUganda, offering customers a range of solar homesystems and appliances.

In addition to investing in companies that are bringingmore reliable electricity to customers, we are alsoinvesting in those that support the broader energy accessecosystem. For example, SteamaCo is an off-grid smartmetering technology company, providing utilities infrontier markets with the tools to automate themanagement of decentralised energy assets. Thecompany automates hundreds of distributed energyassets, which in turn bring electricity to tens of thousandsof homes and businesses across Africa.


We also invested in SunFunder, a solar debt financingfirm that supports the growth of commercial businessesimproving energy access. Sunfunder has loaned morethan $55 million to different solar companies.

In addition to commercial energy access activities, wehelp to provide reliable and safe energy through oursocial investment programmes. For example, when Shellstarted to look for potential business opportunities inMyanmar, we also explored ways to deliver the benefitsof reliable energy to communities in the Tanintharyiregion. Working with Pact, a non-profit organisation, toprovide access to sustainable energy, we have improvedthe livelihoods of around 35,000 people since 2015.

In the Philippines, we launched a project in 2018 at theLogpan village near our Palawan offshore activities tohelp the remote and off-grid community access energyand clean water. We developed a community-run solar-powered energy kiosk that offers small solar homesystems for households and operates a solar-poweredwater pump to provide safe, filtered water.

We also worked in Malaysia with non-governmentalorganisations Tonibung and PACOS Trust to bringelectricity to Saibibingkol community in Sabah. The pilotprogramme uses solar panels and a hydro turbine to give42 households access to a reliable source of electricity.We also set up a socioeconomic development centre inthe village for people to use the electricity for income-generating activities, such as sewing or more efficientdrying of tapioca chips and flour milling. We plan toscale up these efforts to bring electricity to at least twomore villages in 2019.

FUELLING MOBILITYBIOFUELSDuring the transition to a lower-carbon world, differenttransport fuels will coexist. Shell is investing in biofuels,which can be blended with existing fuels such as petroland diesel. When used in vehicles, they can be a cost-effective way of reducing CO2 emissions.

Sugar-cane ethanol in Brazil, for example, can reduceCO2 emissions by around 70% compared withconventional petrol, from cultivation of the sugar cane tousing the ethanol as fuel.

Shell is one of the largest blenders and distributors ofbiofuels. In 2018, we used around 9.5 billion litres ofbiofuels in the petrol and diesel we sold worldwide inorder to meet specific regulations. Raízen, our jointventure in Brazil (Shell interest 50%), produces ethanolfrom sugar cane, with an annual production capacity ofmore than 2 billion litres. In addition to understandingblended biofuel emissions, we want to ensure that otherenvironmental impacts from biofuel production are wellmanaged – such as the effect on soil, air and water –and that there are benefits for the livelihoods oflocal communities.

Read more on our approach to biofuels atwww.shell.com/biofuels.

KKeey dey devvelopmentelopments in biofs in biofuelsuelsWhen purchasing biofuels, we require that they areproduced in a way that is environmentally and sociallyresponsible. Where possible, we source biofuels thathave been certified against internationally recognisedsustainability standards.

We support the adoption of international sustainabilitystandards including the Round Table on Responsible Soy(RTRS), the Roundtable for Sustainable Palm Oil (RSPO)and Bonsucro, an organisation for the certification ofsugar cane. We also support the Roundtable forSustainable Biomaterials and the InternationalSustainability and Carbon Certification (ISCC)for feedstocks.

Shell aims to have 100% of the sugar-cane ethanol andSouth American soy biodiesel used in Shell-blended ortraded biofuels certified as sustainable by 2020. In 2018,60% was certified as sustainable.

All the palm oil that we blend is certified by RSPO or theISCC or covered by offsets from the RSPO certificatetrading system. We continue to participate in the RSPOand support its latest set of standards for sustainablepalm oil production adopted in 2018.

In the Philippines, coconut oil is the primary feedstock forbiodiesel. In 2018, Pilipinas Shell announced the launchof a sustainability project with coconut farmers incollaboration with JNJ, one of our major suppliers ofcoconut methyl ester. The project will help train farmers inmore sustainable farming practices, which can alsoenable them to improve yields and increase their income.

Global bio-component purchase [A][B]by feedstock

a

hi j

bc

de

fg

54%

4%7%

2%

11%

5%2%

9%3% 4%

abcde

fghi

CornMolassesOilseed rapeWheatPalm

SoySugar caneWasteBlended feedstock

j Other

[A] Does not include purchases by Raízen.[B] Percentages do not add up to 100% due to rounding.


http://www.shell.com/biofuels

RRaízaízenenRaízen, our joint venture in Brazil (Shell interest 50%),produces ethanol from sugar cane, with an annualproduction capacity of more than 2 billion litres; exportssugar, with an annual production of about 4.2 milliontonnes; and manages a retail network.

Raízen opened its first cellulosic ethanol plant at its CostaPinto mill in Brazil in 2015. When fully operational, theplant is expected to produce around 40 million litres ayear of advanced biofuels from sugar-cane residues.

Our joint venture in Brazil, Raízen, produces ethanol fromsuger cane.

Through Raízen, we produce one of the lowest CO2 biofuelsavailable today.

Around 42% of Raízen’s ethanol and 45% of its sugarproduction were certified as sustainable to the standardsset by Bonsucro. Raízen alone accounts for 39% of theworld´s Bonsucro-certified sugar cane. By the end of2018, 21 of its 26 mills were certified.

Raízen purchases around half of the sugar cane it uses asa raw material from independent suppliers. Since 2014,the company has worked with two non-governmentalorganisations, Imaflora and Solidaridad, on aprogramme to help its suppliers become moresustainable. Based on volumes, the programme covered96% of third-party sugar cane in 2018.

With 1 gigawatt of installed power capacity, Raízen isalso Brazil's largest producer of electricity frombiomass – straw and bagasse – which are by-products ofethanol and sugar cane production.

For more details, see Raízen’s sustainability report.

DDeevveloping adveloping advanced biofanced biofuelsuelsWe continue to invest in new ways to produce advancedbiofuels from sustainable raw materials, such as wasteand cellulosic biomass from non-food plants.

We have a demonstration plant at the Shell TechnologyCentre Bangalore, India, which features an advancedbiofuel process called IH2, a technology that can turnwaste into transport fuel. The plant can process aroundfive tonnes a day of feedstock, such as agricultural waste,and aims to demonstrate the technology for possiblescaling up and commercialisation.

In August 2018, we announced plans to expand andupgrade the JC-Biomethane plant in Junction City,Oregon, USA, which we acquired in May 2018. Theplant transforms organic waste into renewable naturalgas through a process called anaerobic digestion. Onceupgraded, the facility is expected to produce up to700,000 British thermal units of gas a year.

In the UK, we are working with renewable fuels companyVelocys and British Airways to develop and install awaste-to-renewable jet fuel plant. If installed, the plantwould use post-recycled waste, destined for landfill orincineration, and convert it into cleaner-burning fuels.

MorMore suse susttainable fainable fuel fuel for avor aviaiationtionWe are exploring long-term opportunities for lower-carbon fuels in aviation. In 2018, Shell Aviation (ShellInternational Petroleum Co. Ltd) and SkyNRG announceda long-term strategic collaboration to promote anddevelop the use of more sustainable fuel in aviationsupply chains. SkyNRG blends and distributessustainable aviation fuel as well as developing regionalsupply chains.

In November 2018, Shell Aviation and SkyNRG initiatedthe supply of sustainable aviation fuel to KLM,Scandinavian Airlines and Finnair at San FranciscoAirport. The initial phase of the arrangement aims to pavethe way for longer term, more resilient supply chains forsustainable aviation fuels and reduce the carbonemissions of flights from San Francisco and other airports.The fuel is produced by World Energy, currently theworld’s only sustainable aviation fuel refinery.

The fuel sourced by SkyNRG from World Energy’sParamount refinery in Los Angeles is made from usedcooking oil, resulting in a fuel that has significantly lowerlife-cycle carbon emissions than conventional jet fuel.


https://www.raizen.com.br/en/society-and-sustainability/reports

E-MOBILITYWe are exploring how best to serve an increasingnumber of electric vehicle drivers, both in and beyond ourforecourts. We want to ensure that customers can choosefrom a range of recharging options over thecoming decades.

By 2030, there could be 125 million electric vehicles onthe road according to the International Energy Agency'sNew Policies Scenario, compared to around 3 milliontoday. An adequate recharging infrastructure needs to bedeveloped, to ensure customers can charge their vehiclesand continue their journeys smoothly.

Vehicle charging networks are a relatively new area forShell. In 2017, we acquired NewMotion, one of Europe’slargest charging providers, which operates more than40,000 private electric charge points in the Netherlands,Germany, France and the UK. NewMotion also has morethan 80,000 public charge points across 28 countries inEurope and is developing solutions to provide customerswith the flexibility to charge their vehicles at home andat work.

Shell is working to meet the charging needs of electric vehicledrivers – at home, at work or on the road.

We also offer electric vehicle fast-charging, a servicecalled Shell Recharge, which takes around 30 minutes, atforecourts in the UK, the Netherlands and China. And weare working with high-powered charging networkoperator IONITY to offer even faster charge points in 10European countries.

In 2018, Shell Ventures invested in electric car-chargingcompany Ample. Ample has used autonomous roboticsand smart battery technology to develop an economical,rapidly deployable and widely accessible platform thatdelivers a full charge to any electric car in minutes.

Shell Foundation has provided support to start-upbusiness Aceleron which is exploring, among other things,how to use waste car batteries in the off-grid sector asstorage or a power source. After being taken off theroad, these batteries could reportedly have anotherseven to 10 years of useful life. Read more aboutAceleron at www.shell.com/aceleron.

In 2018, we launched a Formula E partnership withNissan, which will help us to further research anddevelop ways to improve the driving experience forelectric vehicle drivers.

As the number of electric vehicles on the road grows,Shell is also working to provide more electricity fromsources such as wind and solar power that will allowthem to run on low-carbon power sources.

Read more about electric mobility at Shell atwww.shell.com/electricmobility.

EXTERNAL VOICE

Wilson Smith, from the Department of ChemicalEngineering at Delft University of Technology, hasbeen working with Shell on how microscopicphenomena can be best harnessed in variousindustrial processes.

“The increasing supply of low-cost renewableelectricity points towards large-scale electrification ofthe world. Consequently, the discipline ofelectrochemistry, which underlies both electricbatteries and hydrogen fuel cells, is experiencing arenaissance and there’s a huge opportunity toelectrify many parts of industry. I believe Shell canlead this transition. It knows how to integrateand scale up the processes related to electrification tohelp accelerate the technological development ofelectrochemistry.”

Professor Wilson SmithAssociate Professor, Delft University of Technology

HYDROGENHydrogen has great potential to help meet growingdemand for transport, while reducing emissions andimproving air quality. We are helping to build theinfrastructure that will be needed if it is to realisethis potential.

Hydrogen fuel cell vehicles produce no greenhouse gasesfrom their exhaust pipe – the only emission is watervapour. Taking into account factors from production todistribution, if the hydrogen is produced using renewableenergy, then the fuel for these vehicles is virtually emission-free.

Hydrogen is also an option in parts of the transportsector where other low-carbon alternatives are notsuitable or where technology has been slower todevelop. The high energy density of hydrogen makes itparticularly suitable for transport that carries heavygoods over long distances, such as trucks.

Read more about hydrogen as a transport fuel in A drivefor cleaner air.

Hydrogen cars could play a key role in the future of transport.


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In Germany, through our participation in the H2 MobilityGermany joint venture, we are working with thegovernment to develop a national network of around400 hydrogen-electric fuelling stations across the countryby 2023 – with 54 currently open, 20 of which arelocated at Shell retail sites. We are working on thisproject with our joint-venture partners French gas supplierAir Liquide, German car manufacturer Daimler, Austrianoil and gas company OMV, German engineering firmLinde and French oil and gas company Total.

In 2018, we opened the first retail hydrogen fuellingstation in Vancouver, Canada, and our third in California,USA. As part of a consortium led by the Port of LosAngeles to develop the first hydrogen refuelling networkfor trucks in California, we will also develop three newlarge capacity heavy-duty hydrogen truck refuellingstations. One of these will produce hydrogen from 100%renewable biogas. Together, they are being designed tosupport a fleet of 12 trucks each day.

We are also assessing the potential for similar projects inother parts of the USA as well as in Belgium, France,Luxembourg, the Netherlands, Switzerland, the UKand China.

Hydrogen also has many possible applications beyondthe transport sector as a versatile and clean energycarrier. For example, it has a role to play in reducingemissions as a fuel for power plants and as a feedstockfor industry, as well as to store energy for longer and atmuch greater scale than is currently possible withrechargeable batteries.

In 2018, Shell started building an electrolyser, the largestof its kind, to produce hydrogen from water for ourRhineland refinery in Germany. We are also working withour partners to build and operate the world’s first liquidhydrogen ship, which will deliver hydrogen tointernational markets.

In heating, a difficult sector to decarbonise, alongsideefforts to improve energy efficiency, there is a role forhydrogen to be blended into the gas grid.

ENERGY-EFFICIENT PRODUCTSEnergy efficiency can deliver up to 35% of what isneeded to keep global warming below two degreesCelsius by 2050, according to the InternationalEnergy Agency.

Today, we serve more than 30 million customers everyday at 44,000 Shell-branded service stations and by2025 we plan for 40 million customers daily at55,000 stations.

We offer customers products that can help boost theefficiency of their engines by burning fuels more cleanlyand reducing friction and wear. We also supply lower-carbon fuels such as liquefied natural gas, compressednatural gas, liquefied petroleum gas and hydrogen, alongwith electric vehicle charging points.

Starship is designed to show how trucks can be more fuel efficient.

Shell PurePlus Technology converts natural gas into apure base oil – which can form up to 90% of a finishedmotor oil – to improve and protect an engine’sperformance. For example, the technology is used in theShell Helix 0W range of lubricants and can help toreduce CO2 emissions from a car’s operation by up to3%. The Shell Advance motorcycle oil range, which alsouses the technology, can minimise the build-up of enginedeposits, allowing for more efficient power transmission.This can lead to better fuel economy, with somemotorcycles travelling up to five kilometres more per litreof fuel.

For heavy transport journeys, we helped pioneer a newvehicle to show how trucks can be more fuel efficient. Wecollaborated with AirFlow Truck Company to build andtest a hyper-efficient concept truck. The Starship Initiativetruck explores what is possible in truck design, fueleconomy and CO2 reduction.

On completion of a trial drive in the USA from the eastcoast to the west coast, the truck recorded a 248%improvement in freight tonne efficiency compared to theaverage North American truck. If all 2 million trucks in theUSA reached the overall fuel economy and freight tonneefficiency performance of the Starship Initiative, theywould emit an estimated 229 million tonnes of CO2 lesseach year.

We are actively seeking to make road surfaces smarterand the products used in their construction, such asbitumen, more energy efficient and cleaner. Using ourclear bitumen in a light coloured asphalt, for example, wecan reduce the need for lighting in tunnels by up to 40%without affecting driver visibility.

We are also helping to ensure the efficiency of windpower through products and digital services so that itscontribution to the energy mix can continue to grow.

The Starship truck recorded a 248% improvement in freight tonneefficiency on its trial drive.


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We invest in research and development (R&D) to improvethe quality of our products and efficiency of our projects,processes and operations – and to commercialise newtechnologies for the transition to a low-carbonenergy future.

We have a global technology-development network,with major centres in the USA, the Netherlands andIndia. We also have R&D sites in countries such as Chinaand Germany. Hundreds of scientists work at ourfacilities, running R&D projects that seek to, among otherthings, turn natural gas into cleaner fuels and energy-saving lubricants; to bring crude oil up from under the seasafely, economically and efficiently; and to reduce theNet Carbon Footprint of the energy products we sell.

In 2018, we spent $986 million on R&D, compared with$922 million in 2017.

We are using advanced digital data to improve the efficiency ofour ships.

Our R&D projects often involve collaborations with publicor private entities, including business partners, universities,government laboratories, technology start-upsand incubators.

In 2018, we started work on 260 R&D projects withuniversities. Many of these focus on areas crucial for low-carbon energy systems, such as biomass, renewablepower and electrochemical batteries. Our associationwith universities enables students and faculty to tackletechnological challenges beyond foundational scientificinsights, and consider how to scale up their work from thelaboratory to commercial application in theenergy industry.

For example, we are participating in a pilot project withthe Technical University of Vienna and others toimplement a new carbon capture process at a biomasspower plant (see Carbon capture and storage).

We are also improving the performance and efficiency ofour liquefied natural gas carriers and gas plants by usingadvanced digital data. For example, by letting captainsknow exactly what the optimal sailing conditions fortheir ships are, fuel consumption (and therefore CO2emissions) can be reduced by as much as 8%.

In 2018, we announced a new programme that will helpstart-ups working on emerging clean-energy technologiesto accelerate their path to market. Shell GameChangerAccelerator focuses on technologies related to long-termenergy storage and power grid management. Theprogramme works with the US Department of Energy’sNational Renewable Energy Laboratory and has so faridentified four companies to support.

Globally, we support innovation in a number ofways, including:

▪ Shell GameChanger, which works with start-ups andbusinesses on unproven early-stage ideas with thepotential to impact the future of energy;

▪ Shell Ventures, which invests in companies that aredeveloping promising technologies that complementShell’s businesses; and

▪ Shell TechWorks, a programme that brings into the oiland gas sector proven technologies from otherindustries.

Find out more about how Shell innovates atwww.shell.com/energy-and-innovation andat www.shell.com/energy-and-innovation-news .

EXTERNAL VOICE

The Chinese Academy of Sciences and Shell havedeveloped a strategic proposal for a hybrid energysystem.

“To be a leader in energy, Shell is directly supportingresearch and development related to a low-carbonfuture. However, energy and issues such as climatechange are global topics that are closely related tonatural resources and technology advancements. Thismakes things challenging because different countrieshave differing energy structures. Attention mustbe paid to suitable integrated energy solutions forevery region. For example, nuclear coupled withtechnologies that convert coal into other hydrocarbonproducts, or renewables integrated with gasconversion. The education and training of youth arealso important. This is a major opportunity, for Shelland for all of society.”

Professor Yuhan SunChinese Academy of Sciences, China

Developingtechnology


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IN THIS CHAPTER64 Working for Shell66 Revenue transparency and tax67 Social performance71 Working together

Contribution tosocietyOur contribution to society comes in manyforms. It includes providing energy thatmillions of people rely on. We also contributethrough paying taxes which support publicservices, creating jobs and supportingcommunities through our socialinvestment programmes.

In 2018:

EMPLOYEES

82,000on average

TRAINING DAYS

315,000for employees and joint venturepartners

SPENDING

$42.7 billionon goods and services worldwide

SENIOR LEADERS

24%female

VOLUNTARY SOCIAL INVESTMENT

$113 million

DIVIDENDS DISTRIBUTED

$15.7 billion

GRADUATE RECRUITS

46%female

JOBS CREATED

1,374through Shell LiveWIRE

PAYMENTS TO GOVERNMENTS

$64.1 billion

OUR PEOPLEOur people are essential to Shell’s success. We work tomaintain a productive and healthy organisation byemploying and developing talented people, continuallystrengthening our leadership, and enhancing employeeperformance by fostering strong engagement.

In 2018:

▪ we recruited around 460 graduates, 2,160experienced professionals, and 3,440 people for ShellBusiness Operations centres;

▪ 46% of our graduate recruits were female; and▪ we provided almost 315,000 formal training days for

employees and joint-venture partners.

During 2018, we employed an average of 82,000people in more than 70 countries, with around 43% ofour people operating in countries outside Europe andNorth America. Dialogue between management and ourpeople takes place directly and through employeerepresentative bodies where appropriate. We offermultiple channels for employees to report, confidentiallyand anonymously, breaches of the Shell GeneralBusiness Principles or our Code of Conduct, orother concerns.

In Oman a team of female operatives refuel planes forShell Aviation.

We provide equal opportunity in recruitment, careerdevelopment, promotion, training and reward for allemployees, regardless of gender, ethnicity, sexualorientation or physical ability. We actively monitordiversity on a global level and measure therepresentation of women and local nationals in seniorleadership positions and have processes in place toidentity and mitigate biases.

Shell aims to manage the impacts of business changes onpeople respectfully, honestly and with integrity. Affectedemployees are supported in their search for alternativeemployment as appropriate by country law and policy.

EMPLOYEE ENGAGEMENTThe Shell People Survey is one of the principal tools usedto measure employee engagement, motivation, affiliationand commitment to Shell. It provides insights intoemployees’ views and has had a consistently highresponse rate. In 2018, the response rate was 82%, whichwas an increase of 2% compared with 2017, and theaverage employee engagement score was 77 points outof 100, which was an increase of one point comparedwith 2017.

In 2018, we launched an initiative called "I’m Not OK" topromote open and honest conversations about mentalhealth. The initiative is designed to help employeessupport each other, create awareness about how toaccess the professional counselling available throughShell’s employee benefits, and to empower teams tocreate a workplace where it is safe to say ‘I’m Not OK’.

Working forShell

64 CONTRIBUTION TO SOCIETY SHELL SUSTAINABILITY REPORT 2018

WORKFORCE DIVERSITYOur diversity and inclusion approach focuses on hiring,developing and retaining the best people.

Embedding the principles of diversity and inclusion in theway we do business gives us a better understanding ofthe needs of our people, partners, suppliers andcustomers. A diverse workforce, and an inclusive andcaring environment that respects and nurtures diversepeople, is a way to improve our safety andbusiness performance.

At the end of 2018, the percentage of women in seniorleadership positions was 24%, compared with 22% at theend of 2017. We continue to measure and work toimprove our gender balance by making female leadersmore visible and accessible as role models, by providingleadership programmes for women and by embeddingdiversity and inclusiveness in our policies and processes.In 2018, Shell became the first major integrated oil andgas company to set a global minimum standard of 16weeks’ paid maternity leave.

In 2018, our CEO joined the Catalyst CEO Championsfor Change, a group of more than 50 CEOs who pledgeto support women’s advancement at all levels ofleadership. We also launched a global campaign onclosing the gender gap in engineering and technology –joining forces with the UK’s Royal Academy ofEngineering to inspire the next generation of engineers,challenge associated stereotypes and showcase howrewarding and fulfilling such careers can be.

In 2018, we introduced our workplace accessibilityservice, which currently serves 62 locations globally. Theservice is designed to ensure that all employees haveaccess to reasonable physical workplace or otheradjustments so that they can work effectivelyand productively.

At Shell, we support and enable remarkable people fromevery background, and strive to be a pioneer of lesbian,gay, bisexual, transgender and intersexed (LGBTI)inclusion in the workplace. In 2018, we were recognisedas one of the top three organisations in the WorkplacePride global LGBTI inclusive workplace benchmark and

Shell employees in Canada proudly wear the rainbow colours, theuniversal symbol for equality.

earned a 100% score in the Human Rights CampaignFoundation’s Corporate Equality Index. We have alsopledged support for the UN LGBTI Standards of Conductfor Business.

LIVING BY OUR PRINCIPLESOur core values of honesty, integrity and respect forpeople underpin our work with employees, contractors,suppliers, non-governmental organisations and others.

The Shell General Business Principles describe thecompany's core values, its responsibilities, and theprinciples and behaviours by which we do business. Theyalso include Shell’s commitment to contribute tosustainable development – the need to balance short-and long-term interests, integrating economic,environmental and social considerations into businessdecision-making. We aim to do business fairly, ethicallyand in accordance with all applicable laws.

All Shell employees and contract staff must follow ourCode of Conduct, which guides employees on how toapply the Shell General Business Principles in line withour core values. Employees and contract staff are alsorequired to complete Code of Conduct training regularlyand to confirm they understand their personalresponsibilities under the Code of Conduct. Contractorsmust also follow the Code of Conduct when acting onour behalf.

Read our Code of Conduct at www.shell.com/values.

In 2018:

SShell ghell global helplinelobal helpline

1,584Reports to the helpline

CCode of Code of Conduconductt

370Substantiated allegations

TTakaking acing actiontion

266Employees or contractor staff subjectto disciplinary action

TTakaking acing actiontion

92Contract terminations or dismissals

65CONTRIBUTION TO SOCIETYSHELL SUSTAINABILITY REPORT 2018

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SPEAKING UPShell employees, contractors and any third party canreport any potential breaches of the Code of Conductconfidentially and anonymously through several channels,including a global helpline, which is operated by anindependent provider.

Shell has specialists who investigate concerns orallegations about a breach of our Code of Conduct. If aviolation is confirmed, the appropriate Shell company willtake appropriate action up to and including a contracttermination or dismissal. We maintain a stringent noretaliation policy to protect any person making a goodfaith allegation. In 2018, we carried out extensivesessions for managers on harassment awareness andprevention to help ensure people in their team feelcomfortable speaking up.

Internal investigations confirmed 370 substantiatedbreaches of the Code of Conduct in 2018 comparedwith 261 in 2017. As a result, we dismissed or terminatedthe contracts of a total of 92 employees and contractstaff, compared with 73 in 2017. Most Code of Conductviolations related to protection of assets, conflicts ofinterest and harassment.

TACKLING PRODUCT THEFTIn August 2017, after an internal investigation, wereported to the Singapore authorities a suspectedsubstantial product theft from our Pulau Bukommanufacturing site. The authorities arrested andsubsequently charged several individuals in 2018,including eight former Shell employees. We have beenworking closely with the Singapore police force during itsinvestigations, which are still ongoing.

What we uncovered is unacceptable and we are takingsignificant steps to prevent a similar incident fromhappening again. We are focusing on areas includingthe monitoring of products moving in and out of PulauBukom, the vessel management process, and ethics andcompliance training. We are also working withgovernment authorities and industry associations toaddress the issue of oil theft more broadly in the region.

ETHICAL BEHAVIOURIn 2018, we focused on simplifying the ethics andcompliance tools and resources available to everyone atShell. This also included giving senior leaders betterinsight into how well their teams are performing.

Our Ethics and Compliance Office worked toconsolidate the existing internal manuals, bringing contenttogether into a single manual, simplifying the languageand redesigning the layout for digital publishing. In 2018,we launched our integrated ethics and compliancemanual, at the same time making it publicly available(see Ethics and compliance manual)

Additionally, an ethics and compliance dashboard wasdeveloped for use by senior leaders, giving them easyvisibility of their organisation’s compliance with selectedmetrics, such as overdue training.

We launched an ethical leadership expectationsprogramme for senior executives to explore and reinforcewhat Shell requires of leaders at this level. It focuses onvalues, behaviours, business pressures andleadership practice.

Read more at www.shell.com/codeofethics.

ANTI-BRIBERY AND CORRUPTIONShell has clear rules on anti-bribery and corruption andthese are included in our Code of Conduct for allemployees. There is no place for bribery or corruption atShell. Read more about our values at www.shell.com/values.

Various national and international laws prohibit businessinvolvement with certain individuals, entities andorganisations. Our anti-bribery and corruption and anti-money laundering and trade compliance programmes setout the requirements for screening business partners.Using a risk-based approach, we screen potentialbusiness partners before and during the contractualrelationship. In 2018, we carried out 7,759 enhancedpre-screenings for higher-risk contracts. Additionally,around 10 million counterparties are screened on acontinuous basis against a range of trade compliance,anti-bribery and corruption and anti-money launderingwatch lists.

Authorities in various countries are investigating ourinvestment in Nigerian oil block OPL 245 and the 2011settlement of litigation pertaining to that block (see Note25 to the Consolidated Financial Statements in ourAnnual Report).

Tax binds governments, communities and businessestogether. Public funds support healthcare, education,transport and other essential services. Revenuetransparency provides citizens with important informationto hold their government representatives accountableand to advance good governance.

In 2018:

▪ we paid more than $64.1 billion in taxes and royaltiesto governments around the world;

▪ we paid $10.1 billion in income taxes. Our governmentroyalties were $5.8 billion; and

▪ we collected $48.2 billion in excise duties, sales taxesand similar levies on our fuel and other products onbehalf of governments.

OUR APPROACHWe comply with applicable tax laws wherever weoperate. We are transparent about our tax payments togovernments and strive for an open dialogue with them.This approach helps us to comply with both the letterand the spirit of the laws. For Shell, being transparent isalso about showing how developing energy resourcesprovides governments with an opportunity to generaterevenues, support economic growth and enhancesocial development.

PRINCIPLESIn line with the Shell General Business Principles, wesupport several external voluntary codes, including theOrganisation for Economic Co-operation andDevelopment (OECD) Guidelines for MultinationalEnterprises and the Business and Industry AdvisoryCommittee to the OECD Statement of Tax Principles forInternational Business. We endorse the responsible taxprinciples set out by The B Team, a non-profit initiativeformed by a group of global business leaders, and wework towards full implementation of these principles.

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TRANSPARENCYIn 2012, we were one of the first energy companies tovoluntarily publish revenues that our operations generatethrough income taxes, royalties and indirect taxes forgovernments around the world. As of 2016, we makemandatory disclosures under the UK’s Reports onPayments to Governments Regulations 2014, and we fileour Payments to Governments Report with the UK’sCompanies House. The report covering calendar year2018 has been published at www.shell.com/payments.

Transparency is only effective if all parties in a countryfollow the same disclosure standards. Shell is a founderand board member of the Extractive IndustriesTransparency Initiative. Consistent with the initiative’srequirements, we continue to advocate mandatorycountry-by-country global reporting, as most taxpayments are made at the corporate level to nationalgovernments. We support unified revenue reporting rulesand standards applicable to all multinationals,irrespective of their ownership or place of business.

EXTERNAL VOICE

The B Team seeks to catalyse a better way of doingbusiness, for the well-being of people and the planet.

"Since 2012, Shell has been advancing its taxtransparency, providing voluntary disclosures about itspayments to government and economic contribution.Over time, this has enabled key stakeholders, inparticular civil society, to better understand theapproach it takes to responsible tax governance andmanagement. Shell’s commitment to strengtheningboth its practices and leadership in tax transparency,which is reflected in the company’s commitment toThe B Team Responsible Tax Principles, extends tosupporting effective institutions. Shell has engaged inconstructive multi-stakeholder dialogues to help growresponsible tax into a better understood and morewidely practiced business norm."

Robin HodessDirector for Advocacy, Policy and Research,The B Team

Shell is actively involved in revenue transparencydiscussions and we are working to develop an approachthat takes into account the views of the relevant partiesinvolved, including industry, governments andcivil society.

TAX STRATEGYIt is the right of governments to determine tax policiesand tax rates and to draft tax laws accordingly. They doso under strong competition for capital and investment,which is internationally mobile. We use legitimate taxincentives and exemptions designed by governments topromote investment, employment and economic growth.

When considering the viability of investments, tax is oneof the factors we examine. Income tax is just one part ofthe overall tax regime considered. We expect to pay taxon our income in the country where activities take place,and believe double taxation of the same activity bydifferent jurisdictions should be avoided. Shell supportsefficient, predictable and stable tax regimes thatincentivise long-term investment. We expect the laws tobe applied consistently, creating a level playing fieldfor all.

GOVERNANCE OF TAXRoyal Dutch Shell plc’s Board of Directors is responsiblefor maintaining a sound system of risk management andinternal control, and for regularly reviewing itseffectiveness. This system also covers taxation, whichforms an integral part of the Shell Control Framework.Each year, the Board conducts a review of theeffectiveness of Shell’s system of risk management andinternal control, including financial, taxation, operationaland compliance controls.

COLLABORATING WITH OTHERSShell supports cooperative compliance relationships withtax authorities on the basis of the framework proposedby the OECD Forum on Tax Administration. We havethese relationships in the UK, the Netherlands, Singaporeand Italy, and a pilot relationship in Austria. Shell is alsopart of the OECD pilot International ComplianceAssurance Programme, which aims to facilitate open andcooperative engagements between multinationalcompanies and tax administrations.

We provide the authorities with timely andcomprehensive information on potential tax issues. Inreturn, we receive treatment that is open, impartial,proportionate, responsive and grounded in anunderstanding of our commercial environment. Thisapproach improves the transparency of our tax affairsand allows Shell to better manage its tax-related risksthroughout the life cycle of each project.

Social performance means building strong relationshipswith people, understanding their priorities and concerns,and managing our impact. It is essential to being aresponsible organisation and plays a crucial role indelivering Shell’s business strategy at thecommunity level.

We assess and manage the potential social impact of allour projects as part of integrated environmental, socialand health impact assessments. We also contribute tobuilding skills in the communities where we operate by

supporting education and training programmes, and byencouraging the development of local businesses.

To achieve continuous performance improvement, Shellapplies a comprehensive set of standards that definehow we expect Shell companies to operate socially andenvironmentally. These standards are set out in ourHealth, Safety, Security, Environment and SocialPerformance Control Framework (HSSE&SP ControlFramework). We conduct detailed assessment reviews –jointly carried out by senior leaders and social

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performance teams – to provide assurance and visibilityof the risks and achievements of our activities. Thesereviews were piloted in 2016 and took place in 25countries in 2018.

ENGAGING COMMUNITIESShell has community feedback mechanisms at all majoroperations and projects to receive, track and respond toquestions and complaints from community members, aspart of our approach to managing human rights andproviding access to remedy.

Our network of around 100 community liaison officersacts as a bridge between the local community and thebusiness. During 2018, they were offered specialopportunities to meet each other and collaborativelydevelop their skills. Together, the officers and the businessthat they represent aim to continually improve theeffectiveness of community engagement, impactmanagement and how we share benefits withthe community.

For example, we have worked with the Weenhayekindigenous people near our La Vertiente operations inVilla Montes, Bolivia, since 2009, to implement astrategic development plan. The plan includes capacitybuilding and improvements to infrastructure that improvecommunity food security and support income-generatingprojects. To date, Weenhayek families have increasedproductive land from eight hectares to 29, and 72community members have been formally certified astechnicians in agriculture and beekeeping.

We are helping community members maintain beehives andproduce honey at the Jaguar Camp, Tarija, Bolivia. Ivan, pictured,is part of the beekeeping project through the compensationscheme run by Shell.

Our work with the Weenhayek has also informed howwe work with remote subsistence farmers near theHuacareta exploration project in Entre Rios, Bolivia. In2018, we began developing sustainable socialinvestment projects with 47 families. These projects aimto improve livestock security and health, and increase theproduction of fruit and vegetables through improvedagricultural methods, including water storage and dripirrigation. We have also introduced beekeeping to 32families, which we hope will generate a sustainableincome through the sale of honey.

COMMUNITY FEEDBACKWe have community feedback mechanisms at ouroperations and projects to receive, track and respond toquestions and complaints from community members. Thisenables us to capture and resolve concerns quickly in atransparent way, and to track our performance locallyand at a Shell group level.

Types of complaints received in 2018by category

ab

cd f ge

55%

27%

6%6%

3%2%

1%

abc

defg

Social [A]EnvironmentBICCUS (business integrity, contractual and commercial, complaints unrelated to Shell)

SafetySecurityOtherHealth

[A] Social also includes labour, local content complaints

Social complaints received in 2018by category

a

ab

cd

bc

d

51%

7%

35%

7%

Benefits-related [A]Resettlement, land, livelihood and property

Cultural heritage and other impactsStakeholders engagement

[A] Benefits include Labour, Social Investment, Allegation of Unfair Treatmentand Services provided by Shell or Contractor

Environmental complaints received in2018by category

a

b

c

d

ef

g h

48%

17%

8%

7%

4% 2%7%

7%

abc

ef

g

NuisanceSpill

d Flaring

Soil or watercontamination

Air qualityEcosystem, habitat, biodiversity or natural amenityWater quality or quantity

h Other


LOCAL CONTENT AND SKILLSDEVELOPMENTWe support job creation and buy goods and servicesfrom local suppliers that meet our standards. This is oneway for us to share the benefits of oil and gasdevelopment with the wider economy. We also offer oursupport to governments when they are designinglegislative frameworks to promote localeconomic growth.

To ensure we comply with legislation and contribute topeople’s standard of living, our supplier principlesintegrate social considerations in the contracting andprocurement processes.

In 2018, we spent $42.7 billion on goods and servicesworldwide, of which around 61% was in the USA,Canada, the UK, the Netherlands and Australia. In 2018,we estimate around $4.1 billion was spent in countriesthat, according to the UN Development ProgrammeHuman Development Index 2017, have a gross domesticproduct of less than $15,000 a year per person. In thesecountries, Shell companies spent 80%, or around $3.3billion, with local companies.

In Malaysia, Sarawak Shell Berhad collaborated withthe Sarawak State Oil and Gas Unit to identify 400 EastMalaysian vendors offering services including drilling,inspection and maintenance. We shortlisted 30companies and some have already been invited toparticipate in our ongoing tendering process.

In Trinidad and Tobago, four community contractors fromthe transport, catering, maintenance and facilitiesmanagement sectors provide services to Shell Trinidadand Tobago Limited. In 2018, an event we hosted toencourage more companies to join our supply chain wasattended by 31 local contractors, of which 10 werecommunity suppliers.

In 2018, Shell Philippines Exploration B.V. and itscontractor Helicopters New Zealand launched aninitiative to increase the number of Filipinos in technicalpositions as part of efforts to transfer specialist skills toFilipinos and promote local talent in the energy industry.Of the 22 technical roles that were previously filled byexpatriates, 10 are now filled by Filipinos – four aircraftengineers and six pilots.

COMMUNITY SKILLS AND ENTERPRISEDEVELOPMENTOur enterprise development and skills programmescreate opportunities for local people and communities,while adding value to our supply chain. We support thebuilding of diverse new businesses that generate localemployment and the Shell LiveWIRE programme helpslocal entrepreneurs turn their ideas into reality

Shell LiveWIRE marked its 36th anniversary in 2018 andoperates in 18 countries and 10 languages. In 2018, welaunched new programmes in Trinidad and Tobago,France, Kazakhstan and China. We trained 2,686people and supported 1,463 businesses, while1,374 jobs were created. In addition, 43 businessesentered the Shell supply chain.

The Shell LiveWIRE programme helps local entrepreneurs turn theirideas into reality. In 2018, three entrepreneurs from the UK,Malaysia and Indonesia received the top prizes in the 2018 ShellLiveWIRE Top Ten Innovators Awards, a global competition whichhighlights and rewards entrepreneurs that demonstrate excellencein innovation.

Shell LiveWIRE entrepreneurs increasingly focus onenergy solutions, such as affordable and cleaner energyfor low-income communities. For example, Aceleron fromthe UK recycles waste batteries into low-cost energystorage and launched pilots in the Caribbean and Africain 2018. Alternate Energy from Nigeria provides solarand wind powered community solutions.

Carlton Cummins, co-founder of Aceleron, is pioneering low-costenergy storage from waste lithium batteries.

The winner of this year’s Shell LiveWIRE Top TenInnovators award for energy solutions was MetronomeEnergy from the UK. Metronome Energy has developedlow-cost technology to balance demands on the nationalpower grid during peak times by managing whenelectricity is delivered to farming equipment.

Read more about Shell LiveWIRE winners atwww.shell.com/shell-livewire.


https://www.shell.com/inside-energy/giving-batteries-a-second-life.html

https://www.livewire.shell/top-ten-innovators/news/ten-businesses-make-the-final-of-shell-livewire-global-innovation-prize.html

https://www.livewire.shell/top-ten-innovators/news/ten-businesses-make-the-final-of-shell-livewire-global-innovation-prize.html

https://www.shell-livewire.org/alumni/1638/josh-burton-metronome-energy

https://www.shell-livewire.org/alumni/1638/josh-burton-metronome-energy

http://www.shell.com/energy-and-innovation/innovating-together/shell-livewire

SSocial inocial invveessttmentment

$175 millionoverall

SSocial inocial invveessttmentment

$102 millionin lower-income countries

SOCIAL INVESTMENTWe invest in community projects so that local peoplemay benefit from social and economic development. Thisinvestment is sometimes voluntary and sometimesrequired by governments, or part of acontractual agreement.

The intent of our social investment programmes is tobenefit Shell as well as society or the environment. Wehave three global social investment themes:

▪ access to energy;▪ science, technology, engineering and mathematics

(STEM) education; and▪ community skills and enterprise development.

Social investment programme focus areas are determinedby local community needs and priorities.

In 2018, we spent almost $175 million on socialinvestment, of which 35% was required by governmentregulations or contractual agreements. We spent $113million on voluntary social investment, of which around$66 million was in line with our global themes. Theremaining $47 million was spent on local programmesfor community development, disaster relief, road safety,health and biodiversity.

More than $102 million of our total social investmentspend in 2018 was in countries that are part of the UNDevelopment Programme’s Human Development Index2017. These countries have a gross domestic product ofless than $15,000 a year per person. Significant supportis also provided in the form of voluntary work by Shellemployees and equipment donations.

Social investment in 2018proportion of spend

a

a

bcd

f

g

h

e

bcd

e

f

g

35%

14%

2%

6%5%

8%

14%

16%

Required SIRoad safetyCommunity developmentOther (including healthand disaster relief)

Biodiversity and ecosystem servicesCommunity skills and enterprise developmentEnergy access

h Education

Social investment in 2018by region

a

a

bc

d

fg

e

bcd

efg

49%

9%7%

4%

14%

5%

12%

AfricaAsia PacificEurope/Central AsiaLatin America

Middle East and North AfricaMultiple regionsUSA and Canada

STEM EDUCATIONWe actively support science, technology, engineeringand mathematics (STEM) education. Our industry needstalented people with knowledge and skills in these areas,and through our STEM programmes we aim to inspirefuture generations.

NXplorers, our global STEM programme, introducesyoung people to the challenges of solving complexproblems, equipping them with the tools and skillsneeded to create sustainable change. We are helping todeliver a growing, diverse and talented population offuture innovators and leaders.

In 2018, we launched NXplorers in a further 12 countries,including Australia, China, Kazakhstan, India andTrinidad and Tobago. We now support STEMprogrammes in more than 20 countries.

Read more about NXplorers at nxplorers.com and Shell’sapproach to education at www.shell.com/education.

AUSTRALIAIn Australia, students from schools in Perth and Broomewere taught the NXplorers methodology to explorechallenges and design their own sustainability ideas. Atevents, students exhibited projects aimed at improvingfood and energy sustainability issues in their communities.We plan to roll out NXplorers to more schools inWestern Australia in 2019.

In 2018, we also renewed our 33-year partnership withQuestacon in Australia with the launch of a new andimproved Shell Questacon Science Circus designed toinspire a passion and curiosity for science in people ofall ages.


https://nxplorers.com/

https://www.shell.com/sustainability/communities/education.html#vanity-aHR0cHM6Ly93d3cuc2hlbGwuY29tL2VkdWNhdGlvbg

TRINIDAD AND TOBAGOWe hosted the first Trinidad and Tobago STEMEducation National Consultation with more than 200 keystakeholders, including students, parents, teachers andgovernment representatives. Participants discussed howto better integrate STEM into the curriculum and weprovided training in NXplorers to more than 40 teachersand representatives from the Ministry of Education. Weplan further training and a wider roll-out to schools in2019. Read more at www.shell.com/stem.

Teachers and representatives from the Ministry of Educationparticipated in NXplorers training in Trinidad and Tobago.

KAZAKHSTANIn Kazakhstan, we trained 100 teachers fromNazarbayev Intellectual Schools (NIS) in Astana as partof the Solar for Schools project. This helped us identifyteachers who can train the NXplorers methodology as itis rolled out in schools. We also trained students andyoung entrepreneurs at the Astana Business Campus ofNazarbayev University.

SHELL FOUNDATIONShell Foundation is an independent charity that appliesbusiness thinking to the global development challengesof access to energy and transport services.

Shell Foundation provides business support, grants andmarket connections to help pioneering socialentrepreneurs prove new business models in low-incomecommunities. The charity selects partners with thepotential to benefit 10 million people within a 10-yeartime frame, achieve financial independence and spurinternational replication.

Since 2000, Shell Foundation has deployed $310 millionin grants to early-stage businesses and new marketbuilders operating in Africa, Asia and Latin America. ShellFoundation has long-term strategic partnerships with UKand US international development agencies to incubatenew ideas, demonstrate the viability of market-basedsolutions and support the growth of newinclusive markets.

In 2018, the charity continued to support BBOXX, a UKcompany that designs, manufactures, distributes andfinances solar energy systems to improve access toenergy across the developing world. After a successfulpilot in the Democratic Republic of Congo, one of theworld’s least electrified countries, BBOXX signed acontract with the government to supply 2.5 millionpeople with electricity by 2020. Currently, 77% ofthe country’s 62 million people are not connected to thegrid. Read more at www.shellfoundation.org/learning/the-drc-the-best-payg-solar-market-in-the-world.

Shell Foundation has supported Aceleron, a start-up thataims to give used batteries a second life, by connectingthe company with off-grid energy product providers inKenya. The success of the pilot in Kenya has seen ordersreceived for 2,000 additional battery packs. Aceleroncontinued to expand in developing regions during 2018.Read more about Aceleron in Shell’s Inside Energy storyat www.shell.com/aceleron.

In Varanasi, India, Shell Foundation supported socialventure company SMV Green Solutions to supply arange of e-rickshaws that provide safe, clean andaffordable mobility to commuters and help driversimprove their business, health and lifestyle in four cities innorthern India. The 2018 cohort of drivers included 32women, who were provided with training and assetfinance to help them establish their businesses.

Read more about the impact of Shell Foundation atwww.shellfoundation.org/impact.

COLLABORATIONSShell is part of numerous energy-related collaborations allover the world, such as the Oil and Gas Climate Initiative.We collaborate with governments, national oil and gascompanies and many other businesses. We definecollaboration as all forms of working with organisationsoutside Shell. These collaborations range from workingtogether on a project to sponsoring a particular group.

We have close ties with universities in numerous countriesand maintain relationships with a range of non-governmental organisations. We also play an active rolein many trade organisations and industry groups acrossthe world on a wide range of topics.

Our work with organisations around the world gives usgreater insight into our business. Sharing knowledge andexperience with others also contributes to developingbetter practices.

For example, as a member of IPIECA, the global oil andgas industry association for environmental and socialissues, we discuss and share industry best practice ontopics, such as biodiversity, climate changeand resettlement.

In 2018, we joined forces with our industry peers tocreate a Common Framework for Supplier Labour RightsAssessment, as a result of which all participants will useone common framework to assess their suppliers. Theoutcomes of the assessments will then be sharedwith peers.

The views of those we collaborate with may differ fromour own. For example, we may not always agree withtheir opinions on topics such as climate change. In thesecases, we make our views known within the organisationand seek to influence its position.

Shell’s Industry Associations Climate Review, released inApril 2019, assesses for the first time Shell’s alignmentwith 19 key industry associations on climate-relatedpolicy. The report also details new governance principlesto improve how Shell manages its memberships ofindustry associations on climate-related topics. Read thefull review at www.shell.com/public-advocacy-and-political-activity.

Workingtogether


http://www.shell.com/sustainability/communities/education/developing-critical-skills-for-a-changing-world

https://shellfoundation.org/

http://www.shellfoundation.org/learning/the-drc-the-best-payg-solar-market-in-the-world

http://www.shellfoundation.org/learning/the-drc-the-best-payg-solar-market-in-the-world

http://www.shell.com/inside-energy/giving-batteries-a-second-life

http://www.shellfoundation.org/impact

http://www.shell.com/sustainability/transparency/public-advocacy-and-political-activity

http://www.shell.com/sustainability/transparency/public-advocacy-and-political-activity

Collaborations overview

The table shows some of the organisations that we collaborate with globally on topics such as environmental sustainability and technology. Shell also workswith many community-based organisations.

Environmental sustainability

Human rights and social responsibility

Safety and technical standards

Technology and innovation

Transparency and governance

American Petroleum Institute (API)

B Team Responsible Tax Principles

Bonsucro

Building Responsibly

Business for Social Responsibility

Center for Responsible Shale Development (CRSD)

Clean Cooking Alliance

Danish Institute for Human Rights (DIHR)

Earthwatch

Energy Institute (EI)

Energy Transitions Commission (ETC)

Extractive Industries Transparency Initiative (EITI)

Global Gas Flaring Reduction Partnership (GGFR)

Global Road Safety Partnership (GRSP)

International Association of Oil & Gas Producers (IOGP)

International Audit Protocol Consortium (IAPC)

International Emissions Trading Association (IETA)

International Sustainability and Carbon Certification (ISCC)

International Union for Conservation of Nature (IUCN)

IPIECA (industry association for environmental and social issues)

Network of Employers for Traffic Safety (NETS)

Oil and Gas Climate Initiative (OGCI)

Roundtable for Responsible Soy (RTRS)

Roundtable for Sustainable Biomaterials (RSB)

Roundtable on Sustainable Palm Oil (RSPO)

The Nature Conservancy (TNC)

Transparency International UK Business Integrity Forum

UN Global Compact

Voluntary Principles Initiative

WBCSD/TCFD Oil and Gas Preparer Forum

World Business Council for Sustainable Development (WBCSD)


The NAM joint venture with ExxonMobil (Shell interest50%) in partnership with the Dutch government operatesthe Groningen gas field in the Netherlands. Regrettably,production has caused earthquakes that damaged housesand other properties, and caused many people inGroningen to feel unsafe. We are working with ourpartners to help people affected by earthquakes causedby gas production.

NAM has worked hard in recent years to reduce theimpact on people, taking steps such as improving thehandling of damage claims, running a programme tostrengthen houses and public buildings, as well associoeconomic development programmes. Publicacceptance of gas production decreased rapidly asearthquakes continued to affect the region. In 2017, this ledto the realisation that a new approach was required.

HANDLING DAMAGE CLAIMSIn early 2018, the Dutch Ministry of Economic Affairs andClimate introduced a new policy to manage damageclaims. This included setting up a public body to address abacklog of claims and process new claims. The ministryalso required NAM to finalise 6,000 outstanding damageclaims, and in July 2018 NAM sent final offers forcompensation to these residents.

Groningen

NETHERLANDS

As part of the new policy, all claims since March 31,2017, are now the responsibility of the TemporaryCommittee for Mining Damage, an independent publicorganisation. NAM was, and will remain, responsible forall earthquake-related costs. Shell has provided aguarantee that it will fund these costs, up to a maximum of30% in the NAM, which equals Shell’s indirect interest inthe Groningen production system.

Working forsolutions inGroningen

A range of actions have been taken to improve safety, liveability and economic prospects in the Groningen region.


AGREEING A WAY FORWARDThe Dutch government has decided to phase out allproduction from the Groningen gas field by 2030. Shelland ExxonMobil, as shareholders of NAM, reachedan agreement with the government that confirmed clearroles and responsibilities for all parties, including NAMas operator.

The Dutch government is responsible for setting productionrates and balancing the risk of earth tremors with thesupply of gas needed to meet energy demand from thefield. The government is also responsible for all issuesrelated to damage claims handling and the strengtheningof buildings. NAM remains responsible for operating thefield and paying all earthquake-related costs.

It was also agreed that NAM will contribute around $560million to a fund to strengthen the economy and improvethe quality of life of people in the Groningen region.

EXTERNAL VOICE

The Klim-op school is in the Groningen area affectedby earthquakes.

“In our case, making the school earthquake-proof andimproving quality of life, were done simultaneously byNAM. There were a few cracks in the walls of our Klim-op elementary school in Middelstum, a small village inGroningen. With this occurrence and the fact that otherbuildings nearby were in danger of collapse, the 75children and their parents no longer felt safe in theschool. Obviously, we took this feeling seriously. Theschool, local government and the NAM agreed a newbuilding was the only way to restore trust. With the newbuilding, the parents and children feel safe again andthe teachers have a state-of-the-art school that ispowered by renewables. Also, NAM could use ourschool as a test case. And they should, because Imanage eight other schools that have been affected byearthquakes. For us, Klim-op is a good starting point.”

Roelof van den BergDirector of 33 elementary schools in Groningen


SOCIAL PARTNERSOur partners help us respond to a range of community orhuman rights topics and address specific priorities suchas boosting local employment and improving accessto energy.

We work with local and global organisations, includingthe Danish Institute of Human Rights, humanitarianorganisations such as Mercy Corps and non-governmental organisations such as Pact, which help usunderstand and address the needs of the communitieswhere we operate. With some of them, like the CleanCooking Alliance, we build long-standing relationshipsthat can adapt to changing priorities and benefitboth sides.

IMPROVING LIVING STANDARDSOur work with Pact in Myanmar aims to increase accessto cleaner and reliable energy, establish localgovernance systems and implement savings andlivelihood programmes. These efforts have helped toimprove the living standards of around 35,000 people inthe central dry zone and Thanintharyi Region. BySeptember 2018, more than 8,000 households hadpurchased solar systems for their homes and communityareas, giving around 20,000 people access torenewable energy.

Pact set up three funds with a total starting capital ofaround $310,000 that communities can use to help meetlocal development needs such as health emergencies,public infrastructure and education. Around 2,100women in Myanmar have benefited from Pact’s micro-banking programme WORTH, which brings women andolder girls together in small groups to save money,access credit and start small businesses. Around 85WORTH savings groups have been set up so far andthey manage in total about $138,000 in funds, which thewomen can use to finance their own businesses.

CLEAN COOKINGWith our partners from the Clean Cooking Alliance, weco-funded the launch of a campaign to educate ruralpopulations in India about the health benefits of cleanercooking solutions. The campaign, which focuses onGujarat and Uttar Pradesh provinces, employs innovativecommunication channels and technologies, and aims toreach up to 70,000 people.

In China, Shell and the Clean Cooking Alliance haveworked together to implement a market-based cleancooking programme in Liaoning, Henan, Hebei, Hubei,Sichuan, Chongqing and Gansu provinces. A newprogramme in Zhejiang province aims to help smallbusinesses and households make the switch to cleanerand more efficient cookstoves and fuels.

We continue to fund the Alliance’s advisory and financialsupport to clean cooking enterprises around the world tounlock the commercial opportunities of this market forsocial entrepreneurs, whose start-up businesses focus onsolving social, cultural, or environmental problems.

BUSINESS MENTORINGIn 2018, we worked with Mercy Corps to launch theShell MicroMentor platform, which facilitates businessmentoring for entrepreneurs in Brazil, Italy, Nigeria,Pakistan, South Africa, the UK and Trinidad and Tobago.We aim to develop local business skills in thecommunities where we operate through volunteersupport from Shell employees. Through the collaboration,around 20 entrepreneurs were supported withaccounting, finance, management and humanresource training.

BETTER ACCESS TO JOBS AND TRAININGIn Tanzania and Kenya, we support a programme calledEmployment and Skills for Eastern Africa (or E4D/SOGA) in partnership with the German, British andNorwegian governments. This programme aims toimprove access to jobs and economic opportunities forlocal people in natural resource-based industries andrelated sectors through supplier development, vocationalskills development, matching and career guidance, andupskilling training institutions and qualifications.

By the end of 2018, 12,887 people participated in E4D/SOGA-supported training courses, of whom 40% werewomen. So far, 2,719 people found employment and afurther 3,658 have increased their income by an averageof 48.3%. In addition, 314 small- and medium-sizedenterprises and 6,899 small-scale farmers weresupported through E4D/SOGA’s enterprisedevelopment measures.

EXTERNAL VOICE

Shell is working with the Clean Cooking Alliance toachieve universal access to clean cooking solutionsby 2030, in line with the UN SustainableDevelopment Goals.

"We are working with partners to build an industrythat makes clean cooking accessible to familiesaround the world. Shell is one of our foundingpartners and has supported important Allianceinitiatives to strengthen clean cooking markets inChina, Ghana, India, Kenya and Nigeria. Shell hasalso supported the development of a newinternational laboratory standard for cookstovetesting, a critical benchmark for countries looking toimplement clean cooking policies. Through thispartnership, we are supporting businesses to grow,attract private sector investment and reach womenand their families everywhere with affordable, high-quality and appropriate clean cooking products."

Dymphna van der LansCEO, Clean Cooking Alliance


https://www.youtube.com/watch?v=Dli43Ir4vso

https://www.micromentor.org/home

HUMAN RIGHTSWe consult with international organisations, companiesand civil society to understand and respond to currentand emerging human rights issues relevant to ourbusiness. We have collaborated closely with the DanishInstitute for Human Rights since 1999 to assess andimprove our approach. In 2018, the institute providedinsight into emerging human rights issues and advice onemployee communications material, along with criticalthinking and constructive challenge in discussions at ourannual human rights meeting.

ENVIRONMENTAL PARTNERSShell works with environmental organisations tounderstand how to protect areas that are rich inbiodiversity and contribute to the well-being ofcommunities where we operate.

These organisations bring specialist expertise to ourprojects, while at the same time advancing their ownknowledge by working with us. Together, we share ourscientific and conservation knowledge with industry andenvironmental stakeholders.

Since 1999, we have worked with the InternationalUnion for Conservation of Nature (IUCN) on biodiversitypolicy and projects, including in Nigeria, Russia and Iraq.IUCN has also facilitated two independent scientific andtechnical advisory panels to help us mitigateenvironmental impacts.

NIGER DELTAIn 2018, the IUCN published the report IUCN NigerDelta Panel: Stories of Influence. The report documentsthe achievements of the independent panel, which wasset up at the request of Shell Petroleum DevelopmentCompany of Nigeria Limited (SPDC) to enhanceremediation techniques and protect biodiversity at sitesaffected by oil spills in its areas of operation in the NigerDelta. IUCN also published a panel report, Developinga biodiversity conservation strategy for the Niger Delta:Integrating biodiversity considerations into SPDC’soperation, in 2018. While the panel’s formal work endedin 2016, their recommendations continue to inform thecurrent work of SPDC.

SPDC and IUCN have continued to collaborate and in2018, the Niger Delta Biodiversity Technical AdvisoryGroup was formed, consisting of representatives from theNigerian Conservation Foundation, IUCN and WetlandsInternational, to assess the efficacy of SPDC’s revisedremediation standard and to monitor biodiversityrecovery at remediated sites.

BRUNEITogether with Wetlands International, BruneiShell Petroleum Sendirian Berhad, a joint venture (Shellinterest 50%) with the Brunei government, delivered aproject in Brunei in May 2018 to restore local habitatsand prevent erosion. In the peat swamp forest of JalanBadas, an area of around 300 square kilometres, weconstructed peat blocks at intervals along a seven-kilometre canal and planted vegetation to preventerosion. The aim is to raise the water table to protect thepeat from decomposing, and as a result, conserve thehabitat for a diversity of species. We continue to monitorthe restoration and the water table in the area.

OMANShell Development Oman worked with WetlandsInternational to support the first full spring bird migrationcount of the Wetlands Reserve in Al Wusta Governorate,which includes the Barr Al Hikman peninsula. The surveywas carried out in partnership with the Ministry ofEnvironment and Climate Affairs. Results showedthat more than 300,000 birds of about 80 differentspecies made the intertidal wetland on the coast ofOman their home for resting and feeding during theirannual migration.

The spring migration bird count at the Wetlands Reserve in Oman.

ENGAGING EMPLOYEESWe continue to partner with Earthwatch through ProjectBetter World, an employee volunteer scheme thatenables Shell employees to make a meaningfulcontribution to global science and conservation. Theprogramme, which gives employees a more strategic andinformed understanding of sustainability, celebrated its20th anniversary in 2018.

In 2018, 84 Shell employees from 20 countries took partin Earthwatch expeditions to South Africa, Canada, theUK and the USA, which included a learning programmeto hone their sustainability leadership skills. Over the past20 years, more than 1,000 programme participants havecontributed more than 53,000 work hours toenvironmental research.

Through the Earth Skills Network programme, Earthwatchcontinues to help Shell employees build leadership skillsby enabling them to take on a mentoring role in IUCN orUNESCO protected areas. We supported an additionalsix protected areas in 2018, bringing the total to 57 since2009. In 2018, we included Batiyura National Park, ourfirst park in Nigeria.

Read more about our partnership with Earthwatch atwww.shell.com/earthwatch.

NATURE-BASED SOLUTIONSWe work with The Nature Conservancy to betterunderstand how investing in natural climate solutions canhelp address the global climate challenge. This includesexploring how nature-based projects, such as large-scalereforestation, can reduce CO2 levels in the atmospherewhile improving the livelihoods of local communities andpreserving biodiversity and wildlife (see Nature-basedsolutions).


https://portals.iucn.org/library/node/47915

https://portals.iucn.org/library/node/47915

https://www.shell.com.om/en_om/media/2018-media-releases/spring-waterbird-migration.html

http://www.shell.com/sustainability/our-approach/environmental-and-community-partners/earth-skills-network-partnering-earthwatch

EXTERNAL VOICE

Shell partners with Earthwatch to offer employees thechance to participate in environmental research andconservation projects.

"2018 marked the 20th anniversary of our partnershipwith Shell. In that time, we have built an integratedmodel of employee engagement, environmentalscience and community-based conservation initiatives.We have worked together to build Shell’s capacityand knowledge around key sustainability themes,while creating a positive impact on the environmentand communities. Shell can play a significant role insupporting the energy sector, and wider sectors, totransition to a sustainable future. While we recogniseShell has taken some important steps so far, moreurgent action is required and we strongly encouragethe company to set more ambitious targets to supporta global transition to cleaner energy solutions."

Lucian J. HudsonChair, Earthwatch Europe

SUPPLY CHAINShell aims to work with contractors and suppliers thatbehave in an economically, environmentally and socially-responsible manner.

Our approach to suppliers and contractors is clearly setout in our Shell General Business Principles and ShellSupplier Principles. These principles cover requirementssuch as business integrity, health and safety, and humanrights. Working with suppliers and contractors in this wayis central to maintaining a strong societal licenceto operate.

In 2018, Shell spent $42.7 billion on goods and servicesfrom around 32,000 suppliers globally.

Our suppliers and contractors are critical to our ability torun our business. They are involved in almost every stepof our operations – and are often key to achievingsuccessful outcomes and having a positive impact onthe community.

Ensuring we have robust and healthy supply chains isessential to our financial strength and resilience. Oursupply chains also represent important commercial andemployment opportunities for the countries andcommunities in which we operate. At the same time,suppliers and contractors have a key contribution tomake to Shell’s response to the energy transition. Theirskills and innovation are part of what can make itpossible for us to adapt for a lower-carbon future.

We strive to simplify and clarify what we expect from oursuppliers and contractors. We work hard to help themcomply with our requirements, improve their practicesand together raise industry standards.

We closely monitor risks and are clear in ourexpectations of suppliers when it comes to managingthem. We use technology and digital tools to help usmonitor compliance and improve our joint andown processes.

Certain areas of our supply chain may pose a higher riskto labour rights due to their location and the nature ofthe goods and services we procure. We use a definedset of criteria to identify potential supply chain risks and,where we see risk, we ask suppliers and contractors torespond to our due diligence assessments beforeawarding a contract.

This assessment requires our suppliers and contractors todeclare whether they have a process in place to assessand manage social risks with their own suppliers. If gapsare identified, we may work with suppliers andcontractors to help them understand how to close thesegaps, implement corrective action – which may includeon-site audits from Shell – or we may considerterminating the contract.

We have made several external regulatory declarationsthat describe how we manage human rights risks in oursupply chains, including our response to the UK ModernSlavery Act 2015. Shell companies expect contractorsand suppliers to obey the national laws and internationalstandards that require them to treat workers fairly, and toprovide a safe and healthy work environment. Read moreat www.shell.com/humanrights.

In 2018, we joined forces with our industry peers tocreate a Common Framework for Supplier Labour RightsAssessment. This means that all the industry participantswill use one common assessment for all suppliers. Theoutcomes of the assessments will then be shared with theother initiative participants, who will use this informationto take their own procurement decisions.

A major cause of forced labour in global supply chains isthe charging of recruitment fees and related costs frommigrant workers. In 2018, we reviewed our supplierprinciples statements and found there was an opportunityto include the explicit prohibition of such fees, sending anunequivocal message about our expectation to suppliers.

Recognising the impact suppliers can have on localcommunities where we operate, we have also expandedour social performance requirements. The updatedsupplier principles include the requirements for contractorsto respect their neighbours, to manage the social impactsof their activities, to enhance local benefits, and to listenand respond honestly and responsibly to localcommunities – including responding to communityfeedback as a means of providing access to remedy.

Good working and living conditions help to bring about asafer and more productive working environment. Ourapproach to worker welfare means supporting the needsof the individual worker, many of whom are contractors,their relationship with their family and connections withcolleagues. We aim to provide a home away from homefor people by delivering a standard of accommodationand facilities that supports their quality of life and well-being.



https://www.shell.com/business-customers/shell-for-suppliers/about-shell-for-suppliers/_jcr_content/par/textimage.stream/1548991796758/5c0bdf630971f15f9176ae06617ce09f003c8412/shell-supplier-principles-2019.pdf

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https://www.shell.com/sustainability/transparency/human-rights.html#vanity-aHR0cHM6Ly93d3cuc2hlbGwuY29tL2h1bWFucmlnaHRz

Our Contractor Safety Leadership programme pairssenior executives from 19 of our major contractors with aShell leader. In 2018, Shell and all 19 signed up to a setof worker welfare principles developed by BuildingResponsibly, a Business for Social Responsibilitycollaboration with a group of leading engineering andconstruction companies promoting the rights and welfareof workers. The principles aim to establish a globalbaseline in areas such as labour practices, living andworking conditions and grievances. We plan to assessthe principles against our practices and integrate theminto our engagement with contractors.

We are also aiming to work with our contractors in manyareas to help transition to a lower-carbon future. We cansupport the energy transition through the procurementchoices we make and by helping to facilitate technologysolutions in partnership with others. We work with ourlogistics suppliers and contractors to improve how wetrack and measure our Net Carbon Footprint. We alsopartner with suppliers and contractors to reduce ourenvironmental impact and to help us to change how wedo things – reducing waste, for example, from thepackaging of our products.

NON-OPERATED VENTURESShell often works in joint ventures with national and otherinternational energy companies. These organisationsbring important skills and experience to a joint venture.

More than half of Shell’s joint ventures are not operatedby Shell. We do not have direct control over how theseventures embed sustainability in their operations but seekinstead to exert a positive influence on their operationsand offer our support. For instance, our Shell joint venturerepresentatives and the Shell-appointed member(s) of thejoint venture’s board expect our partners to adopt theShell commitment and policy on health, safety, security,environment and social performance (HSSE&SP) or onematerially equivalent to our own. They are also expectedto put in place standards to adequately addressHSSE&SP risks.

When these joint ventures implement our controlframework, or a similar approach, Shell teams carry outindependent audits or participate in the joint venture’sown auditing programmes, which helps to assure the jointventure’s compliance. We also offer to review theeffectiveness of the framework’s implementation,overseen by the joint venture’s board of directors.

We periodically evaluate the health, safety, environmentand community risks of the joint venture. If the jointventure is falling below expectations, plans will be put inplace, in agreement with the other partners, toimprove performance.

In 2018, we continued to work with our partners onadoption of our greenhouse gas and energymanagement processes. For example, we supportedBadr Petroleum Company in Egypt (Bapetco, Shellinterest 50%) to assess its greenhouse gas emissions to areasonable level of assurance as well as to identifyseveral solar and gas-saving opportunities.

Petroleum Development Oman (PDO, Shell interest 34%)has just awarded a contract to build a 100 megawattsolar photovoltaic independent power producer project.The plant will provide power for PDO’s own operationsand be the first of its kind in Oman.

We also helped build capability within PDO to conductcarbon and energy benchmarking of their assets andcollaborated on the implementation of the energyefficiency surveillance software, resulting in annualenergy and cost savings to their processes. Adeployment of the software has also recently beeninitiated in Karachaganak Petroleum Operating B.V.(KPO, Shell interest 29.25%).

In 2018, we trained around 875 people on four large-scale oil spill exercises – one of them in Kazakhstan withthe Kashagan joint venture (NCOC, Shell interest16.81%). Read more in Preparing for emergencies.

DIVESTED VENTURESIn 2018, we successfully completed our three-year $30billion divestment programme, a key part of our strategyto strengthen our financial framework and reshape Shellinto a world-class investment case. Our efforts to refreshand upgrade our assets will continue. We expect to sellat least $5 billion of assets in 2019 and 2020 tocontribute to our ongoing portfoliooptimisation programme.

In 2018, completed divestments meant that we exitedDownstream in Argentina, Upstream in Ireland, andIntegrated Gas in Thailand and New Zealand. We alsocompleted sales of our interest in Canadian NaturalResources Limited, LNG Tiga in Malaysia, the WestQurna 1 field in Iraq, the Draugen and Gjoa fields inNorway and our liquefied petroleum gas marketingbusiness in Hong Kong and Macau.

We also announced sales of our upstream subsidiary inDenmark and the Greater Sunrise fields in Timor Leste.

While we carry out extensive due diligence in eachtransaction to ensure that buyers have the capabilities tomaintain standards in respect of safety, security, theenvironment and responsibilities to neighbouringcommunities, we may be held liable for past acts, failuresto act or liabilities that are different from those foreseen.


IN THIS CHAPTER80 About our data81 Environmental data82 Safety data82 Social data

OurperformancedataEach year, we measure our globalperformance and report on the safety of ouroperations, our impact on the environmentand our contribution to communities.

We began reporting voluntarily on our environmental,safety and social performance with the first Shell Reportin 1997. We support transparency and share informationand data in this report and on www.shell.com.

There are inherent limitations to the accuracy ofenvironmental and social data. We recognise that ourdata will be affected by these limitations, so we continueto improve data integrity by strengthening ourinternal controls.

We provide all non-financial data in this report on a100% basis for companies and joint ventures where weare the operator. Environmental data pertain to directShell company operations unless otherwise stated. Wereport in this way, in line with industry practice, becausethese are the data we can directly manage and affectthrough operational improvements. We refer to thenumber of people employed or contracted on a full-timeequivalent basis.

Operations acquired or divested during 2018 areincluded only for the period in which we operated theseassets. Other data are collected from external sources,employee surveys and other internal sources as indicated.Data marked in the social data table come from aninternal survey completed by the senior Shellrepresentative in each country. The accuracy ofenvironmental and social data may be lower than that ofdata obtained through our financial systems.

We only include data in this report for 2018 that wereconfirmed by the end of March 2019. If incidents arereclassified or confirmed, or if significant data changesoccur after preparation of this report, they will beupdated in the following year’s publication.

ASSURANCEWe have clear standards and reporting requirements forour health, safety, security, environment and socialperformance (HSSE&SP) data.

Shell facilities are required to adopt these standards,which define management roles and responsibilities, thescope of data at facilities and how data are calculatedand collected. These standards are part of our HSSE&SPControl Framework.

To ensure we provide accurate information, our assuranceprocess of HSSE&SP data is also a key element of theHSSE&SP Control Framework. The process flows from thefacility all the way up to group level. Some examples ofthe assurance mechanisms in this process are:

▪ self-assessments at the facility level;▪ internal audits at all levels of Shell;▪ quarterly reviews and assessments of the data at all

levels;▪ an annual series of meetings between leaders at group

level and senior business managers to discussoutcomes and reporting parameters; and

▪ formal sign-off by Shell’s senior country leaders.

The Report Review Panel of independent experts helpsmake sure our reporting is balanced, relevant andresponsive to stakeholders’ interests.

Lloyd’s Register Quality Assurance Ltd has providedlimited assurance of our direct and indirect greenhousegas emissions data for 2018. Limited assurance meansnothing has come to the auditor’s attention that wouldindicate that the greenhouse gas data and information aspresented in the Greenhouse Gas Assertion were notmaterially correct. The assurance statements areavailable at www.shell.com.

Conversions into US and Canadian dollars are based onthe average exchange rates for 2018.

About our data

80 OUR PERFORMANCE DATA SHELL SUSTAINABILITY REPORT 2018



Environmental performance data2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Greenhouse gas emissions (GHGs)Net Carbon Footprint (gCO2e/MJ) 79 79 79Direct total GHGs (million tonnes CO2 equivalent) [A] 71 73 70 72 76 73 72 74 76 69

Carbon dioxide (CO2) (million tonnes) 68 70 67 68 73 71 69 71 72 66Methane (CH4) (thousand tonnes) 92 123 138 132 126 120 93 133 128 127Nitrous oxide (N2O) (thousand tonnes) 1 1 1 1 1 1 1 1 2 2Hydrofluorocarbons (HFCs) (tonnes) 31 23 21 18 16 17 23 22 23 25

Energy indirect total GHGs (million tonnes CO2equivalent) [B] 11 12 11 9 10 10 9 10 9 9GHG emissions associated with exported energy (subset ofdirect GHGs) 3 3 3 2 3FlaringFlaring (upstream) (million tonnes CO2 equivalent) [C] 5.2 8.2 7.6 11.8 13.0 7.4 7.7 10.0 10.4 7.8Flaring (upstream) (million tonnes hydrocarbon flared) [C] 1.5 2.5 2.3 3.5 3.8 2.1 2.3 3.4 3.6 2.6

Nigeria [D] 0.6 0.8 0.5 0.9 1.3 1.1 1.5 2.0 2.4 1.9Rest of the world [E] 1.0 1.7 1.8 2.6 2.5 1.0 0.8 1.4 1.2 0.7

Energy intensityUpstream excl. oil sands, LNG and GTL (gigajoules per tonneproduction) [C], [F] 1.06 1.05 1.02 0.83 0.87 0.89 0.83 0.75 0.74 0.76Refineries: Refinery Energy Index [G] 94.3 94.8 95.4 95.4 94.9 95.6 98.4 100.8 101.8 102.2Chemical plants: Chemicals Energy Index 88.5 88.2 91.0 91.6 90.3 89.8 91.7 90.8 89.3 92.0Acid gases and VOCsSulphur oxides (SOx) (thousand tonnes SO2) 69 81 83 88 97 99 113 136 139 141Nitrogen oxides (NOx) (thousand tonnes NO2) 111 107 122 104 146 156 147 146 159 142Volatile organic compounds (VOCs) (thousand tonnes) 59 95 146 125 151 89 89 129 147 126Ozone-depleting emissionsCFCs/halons/trichloroethane (tonnes) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4Hydrochlorofluorocarbons (HCFCs) (tonnes) 9 7 8 8 6 8 8 12 21 24Spills and discharges [H] [I]Sabotage spills – volume (thousand tonnes) [J] 1.6 1.4 3.9 2.3 2.7 2.2 3.3 1.6 3.0 14.0Sabotage spills – number [J] 111 62 49 95 139 157 137 118 112 95Operational spills – volume (thousand tonnes) 0.8 0.4 0.8 0.8 0.7 0.9 2.1 6.0 2.9 1.4

Nigeria [K] 0.4 0.1 0.3 0.2 0.3 0.4 0.2 5.3 0.7 0.3Rest of the world 0.4 0.3 0.5 0.7 0.4 0.5 1.9 0.7 2.2 1.1

Operational spills – number 92 104 72 108 153 174 207 211 195 275Nigeria [L] 15 10 8 16 38 31 37 64 32 37Rest of the world 77 94 64 92 115 143 170 147 163 238

Hurricane spills – volume (thousand tonnes) [M] 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Oil in effluents to surface environment (thousand tonnes) 1.4 1.2 1.0 1.0 0.9 1.0 1.0 1.3 1.6 1.5Water [N]Fresh water withdrawn (million cubic metres) 199 201 195 186 199 198 203 209 202 198Fresh water consumed (million cubic metres) 147 150 152 141 165 n/c n/c n/c n/c n/cWaste disposalHazardous (thousand tonnes) 592 638 658 455 529 770 820 740 1,048 962Non-hazardous (thousand tonnes) 1,407 1,382 1,491 1,680 1,674 2,065 2,295 1,850 1,079 1,139Total waste (thousand tonnes) [O] 1,999 2,020 2,148 2,135 2,203 2,835 3,115 2,590 2,127 2,101[A] Greenhouse gas emissions (GHG) comprise carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulphur hexafluoride and nitrogen trifluoride. The data are calculated using

locally regulated methods where they exist. Where there is no locally regulated method, the data are calculated using the 2009 API Compendium, which is the recognised industry standard under theGHG Protocol Corporate Accounting and Reporting Standard. There are inherent limitations to the accuracy of such data. Oil and gas industry guidelines (IPIECA/API/IOGP) indicate that severalsources of uncertainty can contribute to the overall uncertainty of a corporate emissions inventory. We have estimated the overall uncertainty of our direct GHG emissions to be around 2%. 2015-2018emissions are calculated using Global Warming Potential factors from the IPCC’s Fourth Assessment Report. Data for prior years were calculated using Global Warming Potential factors from the IPCC’sSecond Assessment Report.

[B] These emissions were calculated using the market-based method in line with the GHG Protocol Corporate Accounting and Reporting Standard.[C] The term upstream in this context includes assets and activities from our Upstream and Integrated Gas businesses.[D] Nigeria includes SPDC onshore operations (0.5 million tonnes flared in 2018) and SNEPCo offshore operations (0.3 million tonnes flared in 2018).[E] Flaring from the Majnoon field in Iraq and from Malaysia amounted to 0.4 and 0.1 million tonnes of hydrocarbons respectively in 2018.[F] Methodology was updated in 2012. Data for prior years are not directly comparable.[G] Data are indexed to 2002, based on Solomon Associates Energy Intensity Index 2006 methodology.[H] All spill volumes and numbers are for spills of more than 100 kilograms. Due to the rounding of numbers, spill volumes for Nigeria and the rest of the world might not add up to the exact total volume

of spills.[I] As of the end of March 2019, there was 1 spill under investigation in Nigeria that may result in adjustments.[J] All sabotage- and theft-related spills have occurred in Nigeria except in 2016 (0.001 thousand tonnes) and 2015 (0.005 thousand tonnes).[K] Nigeria includes SPDC onshore operations and SNEPCo offshore operations. A single spill at the Bonga field offshore Nigeria amounted to 4.8 thousand tonnes in 2011.[L] Nigeria includes SPDC onshore operations (15 operational spills in 2018) and SNEPCo offshore operations (0 operational spills in 2018).[M] 2017 data reflect 4 spills caused by Hurricane Harvey in the USA.[N] Freshwater figures do not include once-through cooling water.[O] In 2018, we sent waste off-site for recycling or reuse, or sold around 400 thousand tonnes of material that would otherwise have been disposed of as waste.n/c = not calculated.

81OUR PERFORMANCE DATASHELL SUSTAINABILITY REPORT 2018

Safety performance data [A]2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

FatalitiesTotal number 2 2 3 7 5 5 8 6 12 20

Employees 0 0 0 1 3 0 3 1 0 1Contractors 2 2 3 6 2 5 5 5 12 19

Fatal accident rate (FAR) 0.4 0.4 0.5 1.1 0.7 0.8 1.3 1.0 1.6 2.3Fatalities per 100 million working hours (employeesand contractors)

Injuries and process safety incidentsTotal recordable case frequency (TRCF) 0.9 0.8 1.0 0.9 1.0 1.2 1.3 1.2 1.2 1.4

Injuries per million working hours (employeesand contractors)

Lost time injury frequency (LTIF) 0.3 0.2 0.3 0.3 0.3 0.4 0.3 0.4 0.4 0.4Lost time injuries per million working hours (employeesand contractors)

Operational process safety eventsTier 1 [B] 35 49 39 51 57 65 91 n/c n/c n/cTier 2 [B] 86 117 107 169 194 246 308 n/c n/c n/c

IllnessesTotal recordable occupational illness frequency (TROIF) 0.4 0.3 0.4 0.6 1.0 0.8 0.5 0.7 0.8 0.6

Illnesses per million working hours (employees only)i Security

Using armed security (% of countries) 21 14 17 19 24 19 17 14 9 17Using armed company security (% of countries) 3 1 1 1 1 3 0 1 1 1Using armed contractor security (% of countries) 10 3 7 8 10 8 10 9 6 10

[A] In line with industry standards, we distinguish three contract modes. Mode 1: contractor/supplier performs work under Shell’s HSSE Management System (HSSE MS); Mode 2: contractor/supplier performswork under its own HSSE MS, which is materially equivalent to Shell’s HSSE MS; Mode 3: contractor/supplier performs work under its own HSSE MS. Also in line with industry standards, we report on safetyperformance only for contract modes 1 and 2.

[B] Process safety events classified according to guidance from the IOGP and API. In 2018, there were nine Tier 1 sabotage-related events. We did not track the number of Tier 2 sabotage-related events in 2018.i Data obtained from an internal survey completed by the senior Shell representative in each country.

n/c = not calculated.

Social performance data2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Gender diversity [C]In supervisory/professional positions (% women) 29.9 29.1 28.0 28.0 29.0 28.8 28.1 27.3 26.3 26.4In management positions (% women) 23.7 22.3 21.0 20.0 21.0 18.8 18.2 17.6 17.0 16.1In senior leadership positions (% women) 24.0 22.2 20.0 19.0 18.2 17.2 16.2 16.6 15.3 14.0

i Staff forums and grievance procedures% countries with staff access to staff forum, grievanceprocedure or other support system 100 100 100 100 100 100 100 99 100 99

i Child labour (% countries with procedures in place)Own operations 100 100 100 100 100 100 100 100 99 98Contractors 100 100 100 100 100 100 100 97 96 97Suppliers

i Forced labour (% countries with procedures in place)Own operations 100 100 100 100 100 100 100 100 99 98Contractors and suppliers 100 100 100 100 100 100 100 97 95 89IntegrityCode of Conduct violations [D] 370 261 341 217 267 181 209 226 205 165

$ Contracting and procurementEstimated expenditure on goods and services in lower-income countries ($ billion) [E] [F] 4.1 4.9 4.4 6 14 12 14 12 13 12Social investment [G]

$ Estimated voluntary social investment (equity share)($ million) 113 111 103 122 160 159 149 125 121 132

$ Estimated social investment spend (equity share) in lower-income countries ($ million) [H] 102 107 96 43 73 74 67 45 61 54

[C] Diversity data obtained from our human resources system.[D] Code of Conduct violations represent the number of reported incidents in the Shell Global Helpline (excluding queries or customer service queries), which have been investigated and closed during the

relevant period and where the allegation was found to be (at least partially) true.[E] Estimated expenditure in countries where gross domestic product amounts to less than $15,000 per year per person (source: UNDP Human Development Index 2015). In 2015, the UNDP index update no

longer includes some of the countries in which Shell invests, which impacts on our reported spend amount.[F] From 2013 onwards, this figure only includes the amount spent on goods and services by Shell group companies.[G] Social investment spending varies from year to year depending on business climate, locations and type of activities under way. This is voluntary social investment and does not include social investments made

through contractual agreements with host governments, voluntary work by Shell employees and donations of equipment.[H] Estimated voluntary social investment spending in countries where gross domestic product amounts to less than $15,000 a year per person (source: UNDP Human Development Index 2016).$ Social investment and contracting and procurement data collected via our financial system since 2007.i Data obtained from an internal survey completed by the senior Shell representative in each country.

n/c = not calculated.

82 OUR PERFORMANCE DATA SHELL SUSTAINABILITY REPORT 2018

Divestments is a measure used to monitor the progress of our divestmentprogramme. This measure comprises proceeds from sale of property, plantand equipment and businesses, joint ventures and associates, and otherIntegrated Gas, Upstream and Downstream investments in equity securities,adjusted onto an accruals basis and for any share consideration received orcontingent consideration initially recognised upon the related divestment, aswell as proceeds from sale of interests in entities while retaining control (forexample, proceeds from sale of interests in Shell Midstream Partners, L.P.).

The companies in which Royal Dutch Shell plc directly and indirectly ownsinvestments are separate legal entities. In this report, “Shell”, “Shell Group”and “Royal Dutch Shell” are sometimes used for convenience wherereferences are made to Royal Dutch Shell plc and its subsidiaries in general.Likewise, the words “we”, “us” and “our” are also used to refer to RoyalDutch Shell plc and its subsidiaries in general or to those who work for them.These terms are also used where no useful purpose is served by identifyingthe particular entity or entities. “Subsidiaries”, “Shell subsidiaries” and “Shellcompanies” as used in this report refer to entities over which Royal DutchShell plc either directly or indirectly has control. Entities and unincorporatedarrangements over which Shell has joint control are generally referred to as“joint ventures” and “joint operations” respectively. Entities over which Shellhas significant influence but neither control nor joint control are referred to as“associates”. The term “Shell interest” is used for convenience to indicate thedirect and/or indirect ownership interest held by Shell in an entity orunincorporated joint arrangement, after exclusion of all third-party interest.Shell subsidiaries data include their interests in joint operations.

We also refer to “Shell’s Net Carbon Footprint” in this report. This includesShell’s carbon emissions from the production of our energy products, oursuppliers’ carbon emissions in supplying energy for that production and ourcustomers’ carbon emissions associated with their use of the energy productswe sell. Shell only controls its own emissions but, to support society inachieving the Paris Agreement goals, we aim to help and influence suchsuppliers and consumers to likewise lower their emissions. The use of theterminology “Shell’s Net Carbon Footprint” is for convenience only and notintended to suggest these emissions are those of Shell or its subsidiaries.

This report contains forward-looking statements (within the meaning of theUS Private Securities Litigation Reform Act of 1995) concerning the financialcondition, results of operations and businesses of Royal Dutch Shell. Allstatements other than statements of historical fact are, or may be deemed tobe, forward-looking statements.

Forward-looking statements are statements of future expectations that arebased on management’s current expectations and assumptions and involveknown and unknown risks and uncertainties that could cause actual results,performance or events to differ materially from those expressed or implied inthese statements. Forward-looking statements include, among other things,statements concerning the potential exposure of Royal Dutch Shell to market

risks and statements expressing management’s expectations, beliefs,estimates, forecasts, projections and assumptions. These forward-lookingstatements are identified by their use of terms and phrases such as “aim”,“ambition”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “goals”,“intend”, “may”, “objectives”, “outlook”, “plan”, “probably”, “project”,“risks”, “schedule”, “seek”, “should”, “target”, “will” and similar terms andphrases. There are a number of factors that could affect the future operationsof Royal Dutch Shell and could cause those results to differ materially fromthose expressed in the forward-looking statements included in this report,including (without limitation):

(a) price fluctuations in crude oil and natural gas; (b) changes in demand forShell’s products; (c) currency fluctuations; (d) drilling and production results;(e) reserves estimates; (f) loss of market share and industry competition; (g)environmental and physical risks; (h) risks associated with the identificationof suitable potential acquisition properties and targets, and successfulnegotiation and completion of such transactions; (i) the risk of doingbusiness in developing countries and countries subject to internationalsanctions; (j) legislative, fiscal and regulatory developments includingregulatory measures addressing climate change; (k) economic and financialmarket conditions in various countries and regions; (l) political risks, includingthe risks of expropriation and renegotiation of the terms of contracts withgovernmental entities, delays or advancements in the approval of projectsand delays in the reimbursement for shared costs; and (m) changes intrading conditions. No assurance is provided that future dividend paymentswill match or exceed previous dividend payments. All forward-lookingstatements contained in this report are expressly qualified in their entirety bythe cautionary statements contained or referred to in this section. Readersshould not place undue reliance on forward-looking statements. Additionalrisk factors that may affect future results are contained in Royal Dutch Shell’sForm 20-F for the year ended December 31, 2018 (available atwww.shell.com/investor and www.sec.gov). These risk factors also expresslyqualify all forward-looking statements contained in this report and should beconsidered by the reader. Each forward-looking statement speaks only as ofthe date of this report, April 2, 2019. Neither Royal Dutch Shell plc nor anyof its subsidiaries undertake any obligation to publicly update or revise anyforward-looking statement as a result of new information, future events orother information. In light of these risks, results could differ materially fromthose stated, implied or inferred from the forward-looking statementscontained in this report.

We may have used certain terms, such as resources, in this report that theUnited States Securities and Exchange Commission (SEC) strictly prohibits usfrom including in our filings with the SEC. US investors are urged to considerclosely the disclosure in our Form 20-F, File No 1-32575, available on theSEC website www.sec.gov.

Shell LiveWIRE, Shell PurePlus, Shell Helix, Shell GameChanger, ShellTechWorks and NXplorers are Shell trademarks.

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83DEFINITIONS AND CAUTIONARY NOTESHELL SUSTAINABILITY REPORT 2018

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