25:08 Lena: Miles, we've traced Shell's evolution through more than a century of changes, but now we're getting into what might be their biggest challenge yet—climate change and the transition to renewable energy. How has Shell been dealing with this?
25:23 Miles: This is where Shell's story gets really complex, because they're essentially being asked to transform the very foundation of their business model. For over a century, Shell's success was built on finding and selling fossil fuels. Now they're facing pressure to become part of the solution to climate change rather than part of the problem.
25:41 Lena: And I imagine this creates some serious internal tensions. How do you run an oil company while also acknowledging that oil use needs to decrease?
25:51 Miles: That's exactly the dilemma. Shell has actually been aware of climate change for decades—they produced an internal film about global warming risks back in 1991. But there's a big difference between understanding the science and figuring out how to transform your entire business around it.
26:07 Lena: Wait, they knew about climate change in 1991 and were making internal films about it? That's fascinating.
26:15 Miles: Right, and this has become a major point of controversy. Climate activists argue that Shell and other oil companies knew about climate risks decades ago but continued expanding fossil fuel production anyway. Shell's response is that they were researching the issue and trying to understand it, not necessarily accepting it as settled science at the time.
26:33 Lena: But eventually they did have to take a public position on climate change, right?
26:38 Miles: Yes, and it's been an evolving process. In 2020, Shell announced plans to achieve net-zero emissions by 2050, which sounds impressive. But when you dig into the details, it gets complicated. They're talking about reducing the carbon intensity of their operations and the energy products they sell, but they're not necessarily talking about producing less oil and gas.
26:58 Lena: So they're trying to make fossil fuels cleaner rather than replacing them entirely?
27:04 Miles: That's part of their strategy, yes. Shell has invested heavily in carbon capture technology, which theoretically allows you to continue burning fossil fuels while capturing and storing the CO2 emissions. They've also moved into natural gas in a big way, arguing that gas is a "bridge fuel" that's cleaner than coal or oil.
27:22 Lena: But I imagine environmental groups aren't satisfied with that approach?
27:26 Miles: Not at all. In 2021, a Dutch court actually ordered Shell to cut their carbon emissions by 45% by 2030, based on a lawsuit filed by environmental groups. It was the first time a court had ordered a private company to align with the Paris Climate Agreement.
27:43 Lena: Wow, that's a pretty dramatic legal precedent. How did Shell respond?
27:48 Miles: They appealed the decision, arguing that courts shouldn't be setting energy policy for private companies. But they also accelerated their investments in renewable energy and low-carbon technologies. Shell now has a "New Energies" division focused on wind, solar, and hydrogen projects.
28:03 Lena: That sounds promising, but how significant are these investments compared to their traditional oil and gas business?
28:10 Miles: Here's where the numbers get telling. Even after ramping up their renewable energy investments, Shell still spends the vast majority of their capital on oil and gas projects. Their renewable energy business is still a tiny fraction of their overall revenue and profits.
28:25 Lena: So they're still fundamentally an oil and gas company that's dabbling in renewables, rather than a energy company that's transitioning away from fossil fuels?
28:35 Miles: That's a fair characterization, and it reflects the enormous challenge they're facing. Shell employs 90,000 people worldwide, most of whom have expertise in oil and gas, not solar panels or wind turbines. Their entire infrastructure—refineries, pipelines, gas stations—is built around fossil fuels.
28:55 Lena: And I imagine their shareholders expect them to continue generating profits from their existing assets rather than just abandoning them for unproven renewable technologies.
7:07 Miles: Exactly. Shell's shareholders have invested billions in oil and gas infrastructure that's expected to generate returns for decades. You can't just write off that investment overnight, even if you want to transition to renewable energy.
29:18 Lena: But surely they're facing pressure from some shareholders to move faster on climate issues?
29:23 Miles: They are. In 2021, about 30% of Shell's shareholders voted for a resolution demanding faster action on climate change. That's a significant minority, and it's growing. Shell is also seeing some major investors, including pension funds, divesting from fossil fuel companies entirely.
29:41 Lena: So Shell is caught between shareholders who want them to maximize profits from oil and gas, and other shareholders who want them to transition to renewable energy faster.
29:51 Miles: And that's not even counting the pressure from governments, environmental groups, and increasingly, their own employees. Shell's younger workforce, in particular, is pushing for faster action on climate issues.
30:01 Lena: It sounds like Shell is trying to manage multiple constituencies with completely different expectations about the company's future.
11:05 Miles: That's exactly right. And their current CEO, Wael Sawan, who took over in 2023, has been trying to thread this needle by talking about "profitable decarbonization"—the idea that Shell can reduce emissions while still generating strong returns for shareholders.
30:24 Lena: But is that actually possible, or is it just corporate speak?
30:28 Miles: That's the multi-billion dollar question. Shell's bet is that they can use their technical expertise and global infrastructure to become leaders in low-carbon energy technologies. But they're competing with companies that started as renewable energy specialists, and it's not clear that Shell's oil and gas expertise gives them any advantage in solar or wind power.
30:47 Lena: And meanwhile, they're still one of the world's largest oil producers, so their environmental impact remains enormous regardless of their renewable energy investments.
30:58 Miles: Right. Shell is still responsible for about 1.7% of global greenhouse gas emissions when you include both their own operations and the fossil fuels they sell. That makes them one of the largest corporate contributors to climate change, even as they're investing in solutions.