Disclosing the metrics and targets used to assess and manage relevant climate-related risks and opportunities.
TCFD Guidance on Metrics and Targets
Seven companies have an absolute target to reduce greenhouse gas emissions, while Exxaro has uses an intensity target. Seven companies do not have any target for reducing their emissions at all.
Four of the 15 companies have long term targets that extend to 2025 and beyond. Notably, Eskom, which emits most of South Africa’s greenhouse gases, has no target to reduce its emissions.
14 out of 15 companies disclose their direct, and indirect emissions, which is a necessary metric for determining risks and the strategy to mitigate those risks. 11 companies also disclose the indirect emissions from their value chains.
Eskom only discloses its direct emissions. This means that the emissions from the generation of purchased energy (such as from coal IPPs) and business activities (such as transport and distribution and business travel) are not reported.
Emissions and Reduction Targets
Companies should report on the current extent of their greenhouse gas emissions, and their targets to reduce emissions. This information can help stakeholders understand how a company measures and monitors its climate related risks as part of their mitigation strategies.
Does the company disclose its GHG emissions?
Recommended Disclosure (b)
The TCFD Recommends the disclosure of Scope 1, Scope 2 and, if applicable, Scope 3 GHG emissions. It is suggested that historical data and “generally accepted industry-specific GHG efficiency ratios” are provided.
Eleven of the fifteen companies assessed report on their Scope 1, 2 and 3 emissions for the current year and at least the previous year.
Scope 1—Direct emissions from owned or controlled sources;
Scope 2—Indirect emissions from generation of purchased energy;
Scope 3—Indirect emissions in the value chain of the reporting company such as those from business activities such as purchased goods and services, business travel; use of sold products; transportation and distribution.
Scope 3 emissions, which are indirect emissions in both the upstream and downstream value chain, are regarded as particularly important in high-emitting sectors as these are central to their lifecycle carbon footprints and mean that they have high exposure to regulation of emissions. The Science Based Targets Initiative requires a Scope 3 target if these emissions represent more than 40% of an organisation’s overall emissions.
Three of the companies report only their Scope 1 and 2 emissions for the current year and at least the previous year, while one company only reports its Scope 1 emissions.
Has the company set GHG emission reduction targets?
Recommended Disclosure (c)
The TCFD recommendations call for the disclosure of key climate-related targets such as those relating to GHG emissions, water usage and energy usage.
GHG emission reduction targets can be absolute or intensity-based. Absolute targets are stronger as, under an intensity target, emissions can increase as along as emission intensity decreases.
Seven out of the fifteen companies assessed indicate that they use stronger, absolute targets for reducing their greenhouse gas emissions. While one company uses as intensity-based target, the remaining seven do not have a target in place at all.
Is there a long-term GHG emission reduction target?
Recommended Disclosure (c)
The TCFD indicates that organisations should consider including the timeframes over which the target applied. Long-term targets are considered to be those over five years.
Only four out of the fifteen companies assessed have an absolute or intensity-based target over five years in duration.
The lack of long-term energy reduction targets makes it difficult to assess alignment with the draft post-2015 National Energy Efficiency Strategy (NEES), which calls for a 16% reduction in the manufacturing sector by 2030 relative to a 2015 baseline and a total annual energy saving of 40PJ by mining companies. The 2005 NEES required a 15% energy reduction in the industrial and mining sectors by 2015 relative to a 2000 baseline. According to Sasol, industry voluntarily agreed at the end of 2015, when the 15% reduction target expired, to an additional 1% annual reduction.
None of the companies covered in this report have set a science-based target approved by the Science Based Targets initiative. A science-based target is “in line with the level of decarbonisation required to keep global temperature increase below 2 degrees Celsius compared to pre- industrial temperatures, as described in the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC AR5).”
The methodology for science-based targets is still under development for a number of sectors, including financial institutions, and chemicals and petrochemicals, but this does not prevent a company from publicly committing to set a science-based target.
South32, which has set a target of being carbon neutral by 2050, highlights its plans for decarbonisation in its Approach to Climate Change 2018 report.
These plans, which are still under development, will initially focus on its GHG-intensive operations at Worsley Alumina and Illawarra Metallurgical Coal, which account for around 60% of its current Scope 1 emissions. The plans will assess potential use of low carbon technology and alternative energy sources and identify investment requirements for each operation. These will be integrated into business and project plans, while residual emissions will be offset.
Does the company provide their internal carbon price?
Recommended disclosure (a)
The TCFD calls on organisations to provide their internal carbon price where relevant. A price on carbon is considered to be one of the best ways to cut carbon emissions and meet the Paris’ agreements target of holding global average temperature increases to 2°C.
A price on carbon can shift the social and economic externalities created by carbon emissions on to the party responsible for the emissions. South Africa’s Carbon Tax law will imposes a carbon price on emitters, but using an internal carbon price can improve investment decisions and aid planning.
Although CDP submissions indicate that several companies are using an internal carbon price to improve investment decisions and aid planning, only one company provides any detail on this in its mainstream reports.
South32 provides a ‘Scope 3 Greenhouse Gas Emissions Methodology’ report that clearly sets out how its Scope 3 emissions are calculated. This includes inclusions, exclusions, the rationale, data sources, and calculation method.
Shell’s 2017 Sustainability Report provides “10 years of comparable GHG emissions data with an accompanying explanation of the scope (including omissions), methodology (including the standard applied and emission factors used) and boundary (equity and operational control basis)”. It also shows how acquisitions, reduction activities, change in output and divestments affected GHG changes between 2016 and 2017
The CDP’s 2017 Putting a price on carbon report notes that “corporate disclosure of details about the scope of a company’s emissions the metric is applied to, the degree of influence it has on decision-making, and the impact it has already had (i.e. has it shifted capital towards energy efficiency measures, low-carbon initiatives, energy purchases, or product offerings?) will further support an investor’s ability to assess the depth of a company’s internal carbon price.”
The report highlights French utility ENGIE as a company that is disclosing how its internal carbon price impacts on business decisions. ENGIE’s CDP 2017 submissions states that it “has decided to no longer pursue new developments in coal, believing that a carbon price will steadily be established in the world’s various regions and that coal-fired power plants will be adversely affected in the future.”