Legalbrief, 5 November, 2019
Legalbrief, 5 November, 2019
|Energy: Sasol bows to pressure on climate change commitments
The release of Sasol’s long-delayed annual results last week, with a special focus on improving its climate change commitments, has been cautiously welcomed by activists, writes Legalbrief. ‘The most striking announcement was the decision to relieve the company’s joint-CEOs of their duties,’ notes Patrick Cairns, a journalist, in an analysis on the Moneyweb site. ‘Sasol also, however, published something concerned with much longer-term realities – its first climate change report that addresses how the company is managing the many challenges it faces in a transition to a low carbon economy,’ he explains. ‘This is something many shareholders have been asking for, and for quite some time,’ he notes. ‘This is particularly critical to Sasol because it is the second largest emitter of greenhouse gases (GHG) in SA after Eskom. Its Secunda coal-to-liquids plant is the biggest single-point emissions source anywhere in the world,’ states Cairns. He quotes Raine Naudé, ESG (environmental, social and governance) analyst at Allan Gray, who said: ‘The report is a meaningful improvement in disclosure. They incorporated quite a few of the disclosure recommendations we requested last year.’ The company has set two key goals in relation to climate change commitments, notes Cairns. ‘The first is to reduce its GHG emissions in SA by 10% by 2030 from a 2017 baseline. The second is a 30% energy efficiency improvement by 2030 from a 2005 baseline,’ he states.
‘However, the reality, which Sasol still appears to be skirting, is that in the not-too-distant future it may not be up to the company what its emission reductions should look like. It may be forced into far more aggressive cutting,’ warns Cairns. ‘This is a part of the report that is missing – what are Sasol’s plans if regulation becomes much more hawkish? Does it have a plan to deal with this kind of major disruption to its operations?’ he asks. ‘Sasol followed up on this report proactively by calling shareholders to discuss it,’ Naudé points out. ‘Of course there is still a lot of work to be done, but I think this is a positive step.’
Just Share, a shareholder activism and responsible investment non-profit organisation, said last week that Sasol’s Climate Change Report was ‘a significant step towards meaningful climate risk disclosure, but it is only the start of the journey’. A report in The Mercury notes that Just Share director Tracey Davies said Sasol had acknowledged the scientific basis for human-caused climate change in the report, and had admitted that its operations, particularly Secunda, faced major transition risks. The report was a ‘significant step’ towards climate risk disclosure. However, ‘given the scale of the issue, and the pace at which we need to change … shareholders will be asking whether Sasol’s targets are ambitious enough, and when achievement of emission reduction targets will be linked to executive remuneration’. Sasol outgoing chairperson Mandla Gantsho acknowledged in the company’s integrated report that concern expressed by stakeholders at its 2018 annual meeting had resulted in the company conducting ‘accelerated resilience testing of our corporate strategy against various climate change scenarios, including the Paris Agreement’s goal, which we support’. Civil society organisations including Just Share, the Centre for Environmental Rights, groundWork and Save the Vaal attended the 2018 annual meeting to challenge the board on the company’s environmental and social impacts, in particular its failure to provide stakeholders with adequate climate risk disclosure or to set greenhouse gas emission reduction targets. In the report Sasol committed to reduce its greenhouse gas (GHG) emissions by at least 10% by 2030, off a 2017 baseline. Sasol’s total GHG emissions in 2017 was 67 632m tons.
Sasol is investigating several gas-supply alternatives for its coal-heavy South African operations as it seeks ways to reduce its carbon footprint. According to a Mining Weekly report, the JSE-listed group is simultaneously working on a ‘sustainability roadmap’, which will have a strong focus on lowering its GHG emissions. CEO-designate Fleetwood Grobler said a team of senior executives has been set the task of studying various gas-supply options, including those that could arise as a result of the development of liquefied natural gas export infrastructure in northern Mozambique. Sasol already imports natural gas by pipeline from southern Mozambique, where it has initiated further exploration activities in an effort to secure additional gas resources for use in its South African fuel and chemicals plants, as well as by other industrial users. The gas option is central to the group’s commitment to reduce its absolute GHG emissions from its SA operations by 10% by 2030 against a 2017 baseline. Already the company has indicated that it will not pursue any greenfield coal-to-liquids plants and will also not pursue new gas-to-liquids prospects as it transitions from being primarily a producer of fuel in Southern African into a global chemicals producers.