https://citizen.co.za/business/2167768/sasol-silently-upping-greenhouse-gas-emissions-without-being-noticed/
[image (table) in online article]
16.8.2019 08:05 am
Sasol silently upping greenhouse gas emissions without being noticed
Patrick Cairns, Moneyweb
The company has never met its own emissions targets, and shareholders
don’t seem to have realised, with some even applauding Sasol’s
environmental policies.
Since 2005, Sasol has failed to meet any of the greenhouse gas (GHG)
emission targets it has set for itself. Yet these targets have been
revised upwards three times, with little explanation or acknowledgement
from the company.
An analysis of Sasol’s reporting going back to 2000 shows that despite
repeatedly setting goals to lower its GHG intensity – which measures how
much carbon dioxide it produces per ton of product – it has consistently
failed to do so. Its greenhouse gas intensity was in fact higher in 2018
than it was in 2002, which was the first year the company disclosed this
measure.
This suggests a lack of concerted action from the company that operates
the world’s biggest single-point emission source – it’s coal-to-liquids
plant in Secunda. Given increased government interventions around
climate change, there is a huge risk to Sasol if it is forced to address
emissions from this plant.
The frequent changing of targets also indicates an absence of
accountability at the company. Sasol first indicated that it was looking
to reduce its greenhouse gas intensity in 2002, when it noted that using
more natural gas in its processes, rather than coal, would lower carbon
emissions. In 2005 it announced its first actual target for these
reductions.
Yet, as the table below indicates, the company has never met any of its
goals.
This shows how Sasol has repeatedly adopted new targets without ever
attaining the previous ones.
Company explanation
“Sasol has had voluntary global GHG intensity targets for a number of
years and our first target was committed in 2005,” Sasol explained to
Moneyweb. “This voluntary GHG intensity target was reviewed and updated
in 2009 to a GHG emissions intensity improvement for all our existing
operations by 15% by 2020, from a 2005 baseline.
“In 2013, we undertook a further review of our GHG intensity targets in
response to government policy developments, as well as the changes in
our emissions baseline following the sale of Arya Sasol Polymer Company
and Sasol Solvents’ Germany operations (these being lower carbon, higher
production facilities), and the exclusion of the Oryx GTL reporting data
from our SD reporting boundary.”
Little progress and not much ambition
The sale of Arya Sasol Polymer and Sasol Solvents’ Germany operations
did push up the company’s GHG intensity as these were low emission, high
production facilities. However, even before these businesses were sold,
Sasol had made almost no progress towards its target. Its GHG intensity
in 2012 was only marginally lower than it had been in 2005.
Sasol’s latest decision to adopt its carbon budget as its emissions
target is also unambitious. It is not a reduction target at all.
As the company itself noted: “Sasol in South Africa has been issued a
carbon budget (emission limit) for 2016-2020. In total, our SA
operations budget contemplates a limit of 301,7Mt [megaton] carbon
dioxide equivalents over the five years, making provision for growth.”
This budget equates to 60.34Mt of carbon dioxide equivalents per year.
In 2018, the company’s South African operations emitted 55.27Mt.
Sasol is therefore not looking to reduce its local emissions, but giving
itself allowance to increase them.
Where’s the scrutiny?
Yet shareholders seem largely oblivious to this constant shifting of the
goalposts. Moneyweb spoke to a number of big asset managers who are
major shareholders in the company, and none were able to accurately
describe the company’s emissions targets, how they had changed, or
whether they had ever been met. Only Allan Gray appeared to have a real
grasp on the targets and how frequently they had been altered.
One of the large asset managers was so unaware of Sasol’s lack of
accountability on this issue that it started off by telling Moneyweb
that it “applauds” Sasol for its environmental policies. Given that
Sasol’s share price is lower today than it was 10 years ago, it seems
incongruous that asset managers would not place the company under
greater scrutiny.
The critical issue is that for shareholders in a company like Sasol to
fully understand and evaluate the risks to their investment, they need
to have complete information. They also need consistency, so that
progress over time can be measured.
“I think the fundamental point is that stakeholder reporting is supposed
to enlighten people,” Tracey Davies, executive director of Just Share,
told Moneyweb. “It is supposed to help them understand your risks and
opportunities.
“But this kind of reporting just confuses people.”
While it is obvious that most of Sasol’s large shareholders haven’t been
as diligent as they should be about holding the company to account,
Sasol’s constant changing of targets has made it unnecessarily
complicated for them to do so.
“The foundation of shareholder engagement with investee companies is on
the basis of what those companies disclose,” Davies explained. “If their
disclosure around emissions and targets and baselines is confusing or
opaque, it makes it very hard for shareholders to engage with the
company on a level playing field. That in turn makes it very hard for
them to understand their risks.”
Who’s watching?
While Sasol clearly needs to improve in this area, there has also been a
lapse in oversight from the company’s major shareholders.
Of the asset managers Moneyweb spoke to, only Allan Gray has challenged
the company on its failure to meet its own targets. This is at odds with
the fact that most of the asset managers Moneyweb asked for comment
reported that they were engaging deliberately with Sasol, trying to
obtain more information from the company and encourage more concerted
action to manage the risks posed by action on climate change.
Jon Duncan, head of responsible investment at Old Mutual Investment
Group, noted that this may partly be because investors are looking at
different measures. Their primary metric, for instance, is the company’s
GHG intensity per unit of revenue, which shows whether the company is
successfully decarbonising its revenue streams.
There is also broader frustration from many asset managers about Sasol’s
reporting in general and its willingness to discuss mitigation strategies.
“What is clear is that awareness among shareholders, society and
government has grown materially over the last three years over the risks
of climate change and how little time there is to take action,” said
David Couldridge, head of ESG engagement at Investec Asset Management.
“We have been trying to improve the transparency and information
available to us from Sasol, because at the end of the day if the
coal-to-liquids or liquid fuels business gets closed down because of
scenarios that you and I can’t envision at the moment, we need to have
clear sight on the risks. We have asked the company to make use of the
TCFD [Task Force on Climate-related Financial Disclosures] for this
purpose.”
Climate change report
Allan Gray ESG analyst Raine Naudé believes that a company in Sasol’s
position should be far more proactive on this issue. It should be
keeping its shareholders on board by leading the engagements, not the
other way around.
“I think that a company like Sasol should be approaching shareholders
and asking: ‘What do you want to know?’” Naudé explained to Moneyweb.
“That would allow for more meaningful engagement.”
In a positive step, Sasol has committed to releasing a comprehensive
climate change report this month as part of its suite of annual reports.
This, it says, will aim to include: “An update of Sasol’s climate change
scenario work; an overview of the activities to manage our risk and
opportunities related to climate change; an overview of our adaptation
strategy; and a view of long-term greenhouse gas (GHG) targets and
internal fiscal instruments.”
Shareholders are cautiously hopeful this will offer a better sense of
the company’s strategies.
“I am hoping to see a clear plan to reduce or offset emissions from
their facility in Secunda,” Naudé said. “And I am hoping to see clear
time lines about when they are planning to do things.”
For Couldridge, it is important that whatever Sasol produces is tangible
and credible.
“The critical issue is what are they going to do from a strategic point
of view about these very serious challenges in front of them,”
Couldridge said. “At the moment, it almost feels like the can is just
being kicked down the road.”
In part two of this special report next week: Addressing the complex
problem of Secunda’s GHG emissions
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