An accountant engaged by Shell as an external auditor is struggling with the company’s climate commitments. EY calls it “neither possible nor appropriate” to argue that the group is acting in line with climate goals. The current policy is not in line with Shell’s goal of being CO2 neutral by 2050 at the latest.
EY has offices in 150 countries and is one of the four largest internationally operating accounting firms. An external auditor performs independent investigation and audit tasks for a company. EY works on behalf of the company’s audit committee on Shell’s 2020 annual report.
In the annual report, EY is specifically asked to investigate whether Shell is on the way to “net zero CO2 emissions by 2050” and is acting in accordance with the Paris climate agreement. EY replies, among other things, that the company will not achieve that target with the current policy.
The critical words are highlighted on the Accountant.nl website. There they led to a discussion about how accountants should deal with the phenomenon of greenwashing. In addition, companies make big promises that are inconsistent with the policy actually implemented.
Conflict between long and short term goals
Shell says it works in accordance with the Paris Agreement, although the wording on the website leaves room for multiple interpretations. “Shell’s climate target is designed to be consistent with the Paris Agreement. To achieve this, we have calibrated our target, using scenarios that have outcomes in line with the Paris Agreement.”
The oil and gas company published its annual sustainability report on Wednesday. In it, the group reiterates the long-term goal of being (net) CO2 neutral by 2050. In the period up to 2030, however, Shell wants to increase the combined production of oil and gas, so there is a good chance that the company’s net CO2 emissions will continue to rise for the time being. Shell emits approximately 1.7 billion tons of CO2 annually. That is about ten times as much as the Netherlands.
That contrast between long-term goals and short-term policy is where it grinds with the implementation of the Paris Agreement. The highest ambition of that agreement is to limit global warming to 1.5 degrees. According to a report by the UN climate panel IPCC published in 2018, the most important condition is that global CO2 emissions are net zero around 2050. Ideally, the world should already have reached about half of that reduction by 2030.
Friends of the Earth Netherlands has filed a lawsuit with seventeen thousand co-plaintiffs about Shell’s climate impact. In it, the group is called on to reduce these emissions by 45 percent in the run-up to 2030. The ruling in this climate case will follow on May 26.