Just Share’s latest investor briefing provides an analysis of the main elements of fossil fuel company Sasol Limited’s 2021 Climate Change Report (CCR 2021). It also makes a recommendation to shareholders in relation to the resolution proposed in Sasol’s 2021 Notice of AGM, which asks shareholders to endorse, on a non-binding, advisory basis, Sasol’s climate change ambition, strategy and actions as set out in the CCR 2021.
In the briefing, Just Share analyses Sasol’s commitments and strategy from the perspective of whether or not these provide the necessary detail and adequate accountability mechanisms to convince shareholders that the company has a feasible, measurable plan to achieve its 2030 emission reduction targets. There is insufficient detail provided in relation to its 2050 targets to allow for meaningful analysis, and so the briefing focuses on the 2030 plan.
There is a concerning lack of detail in the CCR 2021 about several crucial elements of Sasol’s ambitions and actions, which makes it extremely difficult to assess their feasibility and credibility. For the reasons set out in the briefing, Just Share recommends that shareholders do not endorse Sasol’s plans via the November vote.
In deciding whether or not to support Sasol’s non-binding advisory vote, investors should seek clear, detailed answers to at least the 15 questions set out below.
- Despite the urgency to reduce GHG emissions to limit the worst impacts of the climate crisis, Sasol’s emissions have increased in both of the years (2020 and 2021) since it set its first emission reduction target in 2019. As Sasol has set no measurable emission reduction target until 2025, can the company confirm that there will be no further emission increases between now and then?
- Why has Sasol not set any short-term decarbonisation milestones until 2026, other than its plans to procure 200 MW of renewable energy as part of its 600 MW project with Air Liquide?
- Why has Sasol not set any decarbonisation milestones for the period between 2030 and 2050?
- When will Sasol provide its shareholders with full details of how its capital expenditure plans will support the delivery of its decarbonisation targets?
- Sasol regards the carbon price for developing countries used by the International Energy Agency (IEA) in its Sustainable Development Scenario (SDS) as “unrealistic for the current national context”. Given how integral a meaningful, robust carbon tax is to reducing emissions, does Sasol intend to continue to lobby – either directly or through industry associations – against an effective carbon tax, favouring what it describes as a gradual, “tailored carbon price … for the South African context”?
- It appears that Sasol expects the South African government to fund the development of the new pipeline capacity and fossil gas infrastructure required to support its 2030 ambition. What are the estimated costs of such capacity and infrastructure; how will they be financed; and what impact will this have on South Africa’s achievement of the lower range of its updated Nationally Determined Contribution?
- Given that Sasol’s emission reduction strategy relies heavily on its access to affordable and adequate supplies of fossil gas (as yet unavailable), what plans (plus timelines) has Sasol made to cater for the eventuality that it does not secure the fossil gas supplies necessary for its emission reductions?
- How does the unrest and insurgency in Mozambique impact Sasol’s plans to secure significant additional supplies of fossil gas?
- Why does Sasol not disclose methane emissions from its Mozambique operations and when will it do so?
- Why has Sasol not set a methane reduction target and when will it do so?
- When will Natref’s emissions be included in Sasol’s emission reduction targets?
- Through which contractual means is Sasol seeking to acquire electricity from independent renewable energy producers, over which period, what will this cost, and how will this be financed?
- What are Sasol’s plans and relevant timelines to overcome the grid capacity challenges in relation to its renewable energy ambitions?
- Were affected workers and communities consulted in the design of the company’s decarbonisation roadmap? If so, how were they consulted? If not, when and how will they be consulted?
- Given the many uncertainties inherent in every element of Sasol’s plans, at what stage will the company decide whether or not each of its emission reduction plans and targets is on track or is no longer feasible, and what action will it take as a result?
Ultimately, and this is confirmed in Sasol’s Form 20-F filed with the United States Securities and Exchange Commission, the company’s climate ambitions and emission reduction plans are reliant on external factors which are highly uncertain, including the availability, affordability and acceptability of fossil gas, and the commercial viability of green hydrogen. In addition, the delivery of even Sasol’s short-term plans has been scheduled in such a way that there is little prospect of accountability for Sasol’s current management team, should the targets not be met.
Finally, even if all of Sasol’s ambitions are feasible and adequately resourced within a reasonable timeframe, shareholders and other stakeholders should consider whether it is cost-effective and socially just to focus a huge proportion of South Africa’s climate action efforts and resources on ensuring that a single company, which is currently and historically one of the world’s biggest polluters, maintains profitability throughout the transition.