SasolOil & Gas
Production and marketing of hydrocarbons and chemicals. Sasol is the second-highest emitter of greenhouse gases in South Africa. Its Secunda plant is the highest single point source of greenhouse gas emissions in the world.
Sasol has improved its TCFD disclosures with the release of its 2019 Climate Change Report, particularly in the area of metrics and targets. Sasol reports on its direct and indirect emissions (including scope 3) and has disclosed both a short- and long-term reductions target, committing to reduce absolute GHG emissions from its South African operations by at least 10% by 2030, off a 2017 baseline. However, a long-term reduction target of 10% may be inadequate given that Sasol is the second-highest emitter of greenhouse gases, and such a target will not assist South Africa in meeting its Paris Agreement commitments.
Sasol does not adequately disclose the scenario’s used to inform its resilience strategy, nor whether the scenarios relied on are consistent with a 2°C or lower temperature targets of the Paris Agreement. It also does not adequately set out the risks and opportunities it faces as a result of climate change, despite the heightened risks it faces given the high concentration of emissions at its ageing Secunda plant.
Generally, Sasol performs well in terms of the number of disclosures under the TCFD, but the inadequacy of quality disclosures under the strategy element continues to place the company at risk of climate-related impacts.
Emissions Score Card
- 71.29 MtCO2e
- Total Scope 1 and 2 Emissions (South Africa, 2018)
- Contribution to South Africa’s total emissions (estimated)
- Ranking out of 10 emitters assessed (1 = highest)
- 76.59 MtCO2e
- Total Scope 1 and 2 Emissions (Worldwide)
- Is the company a supporter of the TCFD?
- Who has oversight of climate-related risks and opportunities?
Disclosure explicitly mentions that the board is responsible for overseeing climate risk. Board responsibility for “sustainability”, “environmental issues”, or “ESG” is not sufficient.
“Strengthened governance on our material matters through a dedicated Climate Change and Environmental Policy Committee and an Environmental Compliance Implementation Committee” – IR 2018, p 11
“The oversight of our climate change risk responses is executed by the Board, management and relevant committees.”
Specifies board committees responsible (Safety, Social, and Ethic Committee) and management level committees including the Sustainability Coordination Committee and Climate Change and Environmental Policy Steering Committee, including oversight by CEO’s – CCR 2019, p 17
- Does the remuneration policy include performance metrics used to measure and manage climate-related risks?
Remuneration policy includes climate-related performance metrics.
Remuneration Policy short-term incentives’ 2018 key performance targets include energy efficiency improvement of 0.5% in Sasol’s South African operations (with a 5% weighting).
“We promote effective management and achievement of climate-related targets and objectives through appropriate performance incentives”
“Corporate performance targets are set in relation to the long-term incentive structure. For the [CEO] and members of the GEC, the Group STI plan for now only includes the energy efficiency target in the scorecard.”
“Our 2030 GHG reduction target and any further targets emerging from the roadmap development process will inform the incentive targets for 2021, which will include a climate change target.” – CCR, p 15
- Does the company identify climate change as a material business risk?
Climate risks are explicitly mentioned as a material or principal risk in the annual or integrated report.
Climate change is identified as a material issue under ‘Environmental Sustainability’.
“Sasol is dedicated to minimising the environmental impact of its operations globally, while delivering greater social value. Our key focused efforts include management of climate change related risks and air quality compliance for our South African operations.” – IR 2018, p 49
“Climate change-related risks are prioritised as Board-approved Group top risks.” – CCR, p 15
- Has the company outlined the risks and opportunities from climate change?
Detailed disclosure in CDP with disclosure in mainstream reports, but limited detail on timeframes and/or impacts provided.
Sasol’s 20F disclosure states that “climate change poses a significant risk for [its] business as it relates to potential physical impacts including change of weather patterns, extreme events, hurricanes, tornadoes, flooding, sea level rise and water scarcity.” – 20-F 2018, p 12
“Climate change is assessed as part of long-term business viability…” – CCR, p 15 [but no description of what is considered to be short- medium- and long-term impact or horizons]
“Sasol undertook a comprehensive climate change risk review in 2018 using bow-tie methodology” – CCR, p 15
- Does the company describe how its strategy might change to address climate change risks and opportunities?
Disclosure of how climate risks and opportunities are incorporated into strategy through efforts such as mitigation, adaptation, resource efficiency, pollution reduction and transition plans.
“Sasol is developing and implementing an appropriate climate change mitigation response to enable the long term resilience of the company’s strategy and business operations.” – IR 2018, p 34
“We are moving towards lower-carbon energy alternatives, building on our gas successes in Southern Africa by leveraging off our expertise to find gas, build the downstream gas economy, secure a cleaner feedstock to grow our integrated value chain, enhance regional energy security and diversify the energy mix.” – AR 2018, p 23
“Undertaking robust scenario analysis in a carbon-constrained world…Developing an emission-reduction road map with associated targets”
“Investigating further opportunities to diversify our portfolio” – CCR, p 16
[Emissions reduction roadmap is still in development. Includes reduction framework, adaptation strategy, and enabling initiatives and partnerships.]
“Sasol drives energy efficiency at all our facilities by examining operating processes in our business and identifying high opportunity areas. Through our energy efficiency drive, we delivered a 21,7% energy efficiency improvement from 2005 to 2019 for our South African operations and 19,5% for our global operations”
“We are examining the potential of integrating renewable energy into our operations. As a priority, we have conducted studies on a range of renewable energy options for integration at our Secunda facilities.”
“Growing the share of affordable natural gas compared to coal in our operations is one of the most important ways we can reduce the GHG footprint of our operations. We introduced natural gas into our Sasolburg and Secunda Operations in 2004, realising significant GHG and other emission-reduction benefits.”
“In the long term, renewable energy could also be utilised as an energy source for green hydrogen production. We are exploring green hydrogen to determine the extent to which it can mitigate process emissions produced at our Secunda Operations” – CCR, p 22 24
- Does the company describe the climate change scenarios used to inform strategy and financial planning?
Disclosure of scenario analysis indicates that scenarios are used, but only limited descriptions are provided.
“Scenario analysis continues to inform our long-term strategy. We pursue options for further reductions and for a greater role of gas in South Africa’s energy mix.” – IR 2018, p 49
“To inform decision-making, we take a short-, medium- and long-term view of our risks and opportunities, with the use of scenario analysis.” – AR 2018, p 23
“Sasol’s scenario’s have an will continue to play a key tole in our strategy formulation specifically in light of climate change.”
“Our existing macroeconomic scenarios, developed in 2016 and updated in 2018 for the Paris Agreement goal, were used for preliminary robustness testing of our strategy in a lower-carbon future. The robustness test used two Sasol scenarios: a Base Case and a Cooperative world case with a time horizon of 2030” – CCR, p 18
[Description of methodology, and assumptions on which it is based, is vague e.g. “we took into account key global variables…”]
“…none of our current scenarios are fully aligned with the International Energy Agency’ (IEA) Sustainable Development Scenarios…”
“Under the IEA’s SDS, global liquids demand is projected to decline from 95 million barrels per day in 2016 to about 93 million barrels per day in 2030; by comparison, our own Cooperative world case scenario assumes global liquids demand of 97 million barrels per day in 2030.”
“We are currently evaluating the full envelope of scenarios projecting temperature rises and the possible implication on our portfolio.” – CCR, p 19 [not clear if scenario analysis is based on 2 degree or lower scenario, and qualitative and quantitative analysis is lacking.]
- Does the company have a process to manage climate-related risks?
Climate-related risks form part of company-wide risk management programme or specific climate-related risk management process.
“Sasol has identified environmental sustainability as one of our top risks of which climate change is a key driver. Associated risks are assessed and managed on an integrated basis, as many of the top risks have key touchpoints with the environmental sustainability risk.” – IR 2018, p 41
Metrics and Targets
- Has the company set GHG emission reduction targets?
The company has set an absolute emission reduction target.
“Our Targets: Reduce by 2030 the absolute GHG emissions from our South African operations by at least 10%, off our 2017 baseline.” – CCR, p 3
“Our emissions profile, being so significant in comparison to our production for our Secunda Operations, does not lend itself to a GHG intensity-based production target but rather an absolute GHG target. This is evidenced by the fact that small changes in production, as can be seen in 2018, increased our intensity, even though absolute emissions decreased. In light of this, our 2030 target, supporting our roadmap execution is absolute reduction-based for our South African operations.” – CCR, p 10
- Is there a long-term GHG emission reduction target?
There is an absolute or intensity reduction target over five years in duration.
“Work already commenced to enhance Sasol’s climate change disclosures in 2019 to include a view on long term GHG targets, internal fiscal instruments and an update of our climate change scenario work.” – IR 2018, p 49
“Our Targets: Reduce by 2030 the absolute GHG emissions from our South African operations by at least 10%, off our 2017 baseline.” – CCR, p 3
- Does the company disclose its GHG emissions?
- Scope 1, 2 and 3
Companies report on their Scope 1, 2 and 3 emissions for the current year and at least the previous year.
“Scope 3 Includes only the emissions as a result of the charter flights to Vilanculos, Mozambique where our Central Processing facility is located” – SR 2018, p 3
“Sasol reports our GHG emissions in accordance with the IPCC and World Business Council for Sustainable Development GHG Protocol.”
Reports Scope1, 2, and 3 for the period between 2016-2019. Scope 3 only includes emissions for Mozambique (see SR note above) – CCP, p 31-32
Additional scope 3 emissions reported in CDP. Describes how scope 3 is calculated, what it includes and total for all categories. – CCP, p 11
- Does the company provide their internal carbon price?
No internal carbon price is disclosed.
“Sasol supports carbon pricing as a tool to enable a transition to a lower-carbon economy, however, we remain concerned that the carbon tax may result in unintended consequences for South Africa.”
“To ensure the viability of our projects and our long-term strategy, with regard to climate change issues, we developed and implemented internal South African carbon prices to assist with evaluating our business decisions.” – CCR, p 20
[But does not disclose carbon price]
- Does the company disclose the extent of liability under the carbon tax?
Liability is disclosed without additional information.
Sasol estimates in its CDP 2018 disclosure that the impact of the tax could range between R0.7bn and R2bn annually.
“Our preliminary estimated liability is approximately R800m to R1bn in 2020, escalating at CPI +2 percentage points until 2022. Thereafter, our liability is uncertain as it is dependant on the design of the carbon budget and tax process, which is still outstanding.”
[Does not disclose whether the rate being used is R120/tonne of CO2 or is the rate after various allowable deductions]
- Does the company disclose its participation in the DEA's voluntary carbon budget programme?
Participation is disclosed in mainstream reports.
“We are involved in the pilot carbon budget process for the period 2016-2020. Over the past two years we emitted approximately 115 million tons of carbon dioxide equivalents of our carbon budget limit of 302 million tons to 2020. Current projections indicate Sasol is on track with its budget.” – AR 2018, p 49
“In addition to our 2030 absolute GHG reduction target, Sasol adopted the voluntary short-term carbon budget approved by the South African government as our internal target in 2016. Our internal carbon budget target, applicable to our South African operations, sets a limit for calendar years 2016 to 2020 of 302 Mt CO2e in total, of which we used 169 Mt CO2e as at December 2018.” – CCR, p 22
- Integrated Report 2018
- Sustainability Report 2018
- Form 20-F
- Annual Financial Statements 2018
- Carbon Disclosure Project (CDP) 2018 Climate Change submission
- Climate Change Report 2019
This report is accurate as at 11 November 2019.
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