Climate assurance:

Summary

To prepare for an expected wave of new sustainability disclosure regulation, Shell mobilised a multi-disciplinary team and governance structure to oversee delivery and provide assurance to the audit committee.

Challenge

Companies in the UK and Europe are readying for a raft of new regulation on sustainability-related disclosure. To comply, companies must build capability while providing assurance to their audit committees that requirements are being met. 

Leading this wave is the EU Taxonomy, a European Union regulation that requires companies to disclose financial information about their environmentally sustainable activities. Compliance with its provisions requires collaboration across disciplinary boundaries while navigating complexity, short application timelines and numerous interpretive questions. Implementing the taxonomy posed an early test of Shell’s approach to the rapidly evolving regulatory landscape for non-financial reporting.

Solution

Shell mobilised an integrated team of finance and sustainability experts to design and implement a reporting process. External sensing was undertaken to validate the company’s interpretation of the regulation. Early engagement with auditors facilitated alignment on accounting policy and reporting controls.

A governance body chaired by the vice president of group reporting, with participation from key internal functions, provided a forum for building alignment and resolving challenges. The audit committee was briefed on the regulatory landscape for non-financial reporting as well as the disclosures relating to the EU Taxonomy (see page 160 of the Shell plc 2021 Annual Report and Accounts). 

For Shell, this showed that new sustainability disclosure regulations require the creation of integrated, multi-disciplinary capabilities to drive compliant disclosures and provide assurance to the audit committee that requirements are being met.