Investor engagement initiative on climate change Climate Action 100+ (CA100+) issued its first Net Zero Company Benchmark of the world’s biggest corporate emitters, including petrochemicals and chemicals producer Sasol and State power utility Eskom.
However, in a response to questions by Engineering News, Sasol says it is regrettable that the report has been publicly released and commented on while Sasol was not provided an opportunity to comment and that its previous and recent comments on a few “key elements” have not yet been addressed in the report.
CA100+ states that the benchmark shows “unequivocally” that, despite years of promises and commitments, the world’s largest carbon emitters are failing to take the action required to avoid “catastrophic” climate change and that the “soft engagement” approach of their investors is not delivering the results required to turn the situation around.
The benchmark defines nine key indicators of success for business alignment with a net zero emissions future, and with the goal of the Paris Agreement to keep global temperature increases to within 1.5 °C above preindustrial levels.
The benchmark finds that Sasol’s current greenhouse-gas (GHG) emission reduction target is not aligned with the goals of the Paris Agreement, contrary to Sasol’s claims that it is, states CA100+.
Further, the benchmark finds that Sasol does not fully comply with any of the nine benchmark indicators. As such, Sasol does not meet any of the requirements for four indicators and only meets some of the criteria in five of the benchmark’s indicators.
Eskom meanwhile, does not meet any of the criteria in any of the benchmark’s nine key indicators and metrics.
Sasol says CA100+’s scoring is not representative of Sasol’s performance, context (owing to the lack of assessment criteria that takes into account the developing country context Sasol largely operates in) and the reduction journey Sasol is on and its associated efforts to “justly transition”.
“We have consistently indicated that the challenge of this assessment lies in the binary nature of the approach following a process that does not allow for respondents to provide extenuating circumstances that play a critical role in how corporates in developing countries are managing climate change,” states Sasol.
In its view, Sasol states, CA100+’s “inflexible binary” indicators and responses, without qualifiers, lack the ability to recognise valid and real commitment, context and intent by some corporates, including Sasol, to transition.
“In this situation, investors and stakeholders may be wrongly left to believe that Sasol does not want to transition.”
In addition, Sasol counters that the manner in which the CA100+ assessment has been considered has created the impression that Sasol does not have a clear emissions reduction strategy.
This “is not the case”, states Sasol, adding that its formal climate change disclosures (which include its suite of yearly reports and the carbon disclosure project) are available on its website.
The overall scores of the benchmark are very low, with only 25% of companies assessed having a “net zero by 2050 (or sooner)” ambition; only 9% have a decarbonisation strategy to meet their long and medium-term GHG reduction targets; not one has aligned its capital allocation with GHG emission reduction targets; and only 1% meet all criteria in relation to climate policy engagement.
CA100+ reveals that Sasol’s targets are not aligned with the goals of the Paris Agreement because its current GHG emission reduction target (set in 2019) is to reduce its absolute GHG emissions (from South African operations only) by at least 10% by 2030.
However, Sasol’s benchmark is from a 2017 baseline of 63.9-million tonnes of carbon dioxide equivalent (CO2e).
To illustrate the scale of Sasol’s emissions, CA100+ states that, in 2019, Sweden emitted 42.77-million tonnes of CO2e; Austria 68.5-million tonnes; Israel 64.17-million tonnes and Kenya emitted 17.32-million tonnes of CO2e.
In this vein, Sasol says it is “premature to presume” it will not be aligned with the Paris Agreement and CA100+ indicators for setting a long-term ambition, especially when these announcements have not been made yet. Sasol expects to disclose these later this year.
Sasol also points out that its just transition indicator, which is unassessed for this cycle, will address shortcomings.
CA100+ points out that in an October 30, 2020, letter to Just Share, Sasol stated that “it is our view that our target and the associated roadmap are aligned with the principles of the Paris Agreement that provide for such to be appropriate for the specific conditions of each of the countries as parties to the agreement.”
Further, South Africa’s GHG emission reduction targets have been rated as “highly insufficient” in terms of meeting the goals of the Paris Agreement, and CA100+ says Just Share disputes Sasol’s position that its targets only have to be aligned with national targets for them to be “Paris-aligned”.
Therefore, CA100+ states that the findings of its benchmark support Just Share’s position that Sasol does not have any long-term GHG reduction targets. “The benchmark findings are that Sasol’s short- and medium-term targets (to 2030) are not ‘aligned with a trajectory to achieve the Paris Agreement goal of limiting global temperature increase to 1.5 °C'.”
Meanwhile, CA100+ highlights that, although Sasol says it is “in the process of defining a 2050 reduction ambition and roadmap . . . allow[ing] shareholders a nonbinding vote on its climate plans at its November 2021 annual general meeting”, the CA100+ benchmark findings “make clear” that it is not enough just to set a 2050 GHG emission reduction target.
As such, the CA100+ states that it will also be crucial for Sasol to include in its 2050 plan a net-zero GHG emissions ambition statement that explicitly includes at least 95% of Scope 1 and Scope 2 emissions, and the most relevant Scope 3 emissions.
“Long-term targets must be accompanied by robust short- and medium-term targets to achieve the 2050 ambition.”
In addition, CA100+ states that Sasol’s future capital expenditures must be aligned with long-term emission reduction targets; and that boards and executives must improve climate change governance, and executive remuneration must be directly tied to emission reduction targets.
Sasol challenges CA100+’s assessment that its board failed to provide its position on climate change, and that, in actual fact, climate change management is overseen by the Sasol board of directors.
“As previously indicated to CA100+ and disclosed in our suite of annual reports, Sasol in 2018 appointed Muriel Dube as a nonexecutive board member with specific sustainability and climate change knowledge and experience to enhance and support the Sasol board’s [climate change] oversight role and accountabilities.”
Sasol also proclaims that Dube still serves on the board, and that she is Sasol's safety, social and ethics committee chairperson.
Further, CA100+ says that disclosures that claim to be aligned with the recommendations of the Task Force on Climate-related Financial Disclosures must use climate scenario planning that includes the 1.5 °C scenario, and encompasses the entire company, according to CA100+.
If Sasol’s 2050 ambition and roadmap do not meet these criteria, CA100+ state that shareholders should not support the company’s nonbinding resolution in November.
“The CA100+ benchmark shows that investors all over the globe must take a much stronger stance in their engagement with high-emitting companies. It is not sufficient to rely on weak disclosures and companies’ behind-closed-doors commitments to improve their climate ambition and action,” states CA100+.
The benchmark findings show, in “very stark terms”, that it is time for all investors who claim to be committed to climate action, whether members of CA100+ or not, to “raise the bar”, the organisation concludes.
Meanwhile, Sasol states that because there is a lack of transparency and provision of the full assessment criteria used by CA100+, it is not party to manners in which publicly available information is considered for purposes of scoring.
As such, Sasol says, it is likely that not all the relevant information is considered holistically and that justifiable nuances in governance approaches by corporates are not provided for or considered as part of the CA100+ assessment.
“As a responsible organisation, Sasol is focused on delivery and is pursuing all feasible options to reduce GHG emissions in line with the Paris Agreement within the countries where we operate,” the company states.
Sasol says it is “on a journey”, and is confident it will achieve higher scores on the relevant indicators once its climate change approach is announced later this year.