More than a decade ago, when Sasol switched Sasolburg feedstock from coal to Mozambican-sourced natural gas, it was able to notch up a hefty reduction in its greenhouse gas emissions.
Since then, despite growing pressure from environmental and community organisations as well as a slightly more critical investment community, there has been no progress on the emissions front.
But it seems Sasol is taking emissions and climate change seriously. So seriously, said CEO Fleetwood Grobler at the group’s AGM on Friday, that it’s "tripling the 2030 [emissions] reduction target".
Lest there be any doubt about this commitment, its recently released "Climate Change Report" contains a roadmap the company will be following to achieve the tripled target of a 30% reduction in greenhouse gas emissions, as well as a pathway to net zero emissions, by 2050. That report sets out Sasol’s "climate change ambitions, strategy and its actions" and was put to a nonbinding advisory vote at the AGM.
It seems increased targets and detailed roadmaps were all that Sasol’s institutional shareholders needed. They overlooked enormous gaps in the energy giant’s ambitious plan and voted overwhelmingly in favour of the resolution. Only 3.37% of the 72.9% of shareholders who voted on the resolution opposed it.
Support from the traditionally hard-nosed institutional shareholders indicates they have adopted a kindly approach: a mix of coaxing and wishful thinking.
Rob Lewenson, head of stewardship at Old Mutual Investment Group, says there has been a major change in Sasol’s engagement strategy this year.
"We’ve been engaging with management and the board for the past six years and for most of that time they rejected our environmental impact concerns and our shareholder resolution in 2019 proposing better climate disclosure linked to executive pay," he says.
Last year, he says, "it was prepared to listen to us and in conjunction with our colleagues at Climate Action 100+, we had several useful meetings."
In September Sasol hosted a capital markets presentation and gave an indication of where its climate strategy was going.
Lewenson says: "The strategy is not where it should be and there remain important gaps to be urgently addressed, including leadership responsibility for the plan and ties to remuneration, but management provided a lot of important details and at last seems to realise how urgent the situation is." He adds that given where Sasol was a few years ago, Old Mutual reckoned that giving qualified support was appropriate.
Ninety One voted in favour of the climate change resolution for similar reasons, essentially the desperate hope that with a little bit of encouragement Sasol might stop trashing the neighbourhood.
Kotie Basson, head of marketing at Ninety One, says it backed the resolution because the group’s emissions reduction targets were appropriately ambitious. "The target is largely aligned with SA’s 1.5°C Paris-aligned path that was recently approved by the SA cabinet," Basson tells the FM, referring to SA’s updated nationally determined contribution under the Paris Agreement.
Like Old Mutual, Ninety One is encouraged but not yet persuaded by Sasol’s case. Basson queries whether Sasol has sufficiently costed the targets in terms of capital expenditure and margins, and whether its progress can be monitored.
"We have supported their climate plan on the basis that they provide regular communication on the details and developments on these issues," says Basson, warning that if Ninety One does not see sufficient progress in the months ahead "it may well choose to vote differently next year".
Also in the "could do better but has shown some progress" voter category is Allan Gray, whose Raine Naudé says the climate report "showed a substantial improvement on Sasol’s climate-related disclosure", and notes that the group has increased its emissions reduction target.
"We, of course, expect Sasol to make further progress from this point but recommended endorsing the report in light of the material improvements," Naudé tells the FM.
Perhaps because they represent communities immediately affected by Sasol’s emissions or perhaps because they have been focused on the issue for well over a decade, the environmental and shareholder activist groups at Friday’s AGM were not inclined to give the group the benefit of the doubt.
For most of those years Sasol has denied there’s a problem and has relied on lobbying the government to avoid dealing with restrictions on its environmental degradation. Its status as a large employer and taxpayer has regularly trumped its status as SA’s second-largest emitter of greenhouse gases (after Eskom). The Secunda coal-to-liquid plant is the largest single point source of greenhouse gas emissions in the world.
Sasol’s impact is a Southern African one, with community representatives from Mozambique revealing an impact at odds with the one Grobler presented.
For Just Share, the Centre for Environmental Rights, Justiça Ambiental, Greenpeace Africa, groundWork, the South Durban Community Environmental Alliance and the Vaal Environment Justice Alliance, Sasol’s climate report does not provide any of the detail needed to convince stakeholders that it is not a ploy to extend its modus operandi and delay doing what it has to do. The report is short on details of the steps and capital needed to reduce emissions, and does not stand up to much scrutiny, they say.
In a report just weeks before the AGM, Just Share described a lack of detail on crucial elements of Sasol’s ambitions and actions that makes it difficult to assess their feasibility and credibility.
Just Share says the climate ambitions and emissions reduction plans rely on external factors that are uncertain, including the availability and acceptability of fossil gas, and the commercial viability of green hydrogen. "In addition, the delivery of even Sasol’s short-term plans have 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," says the Just Share report.
If targets are not set in reality and if there are no financial implications for the executives who set them, tripling them is effortless.
Southern Africans, particularly those living near Sasol’s operations, must hope that the younger generation of Sasol executives, who made an impressive first-time appearance at the AGM, will have the chance to draw up a more persuasive plan.
Those who opposed Friday’s resolution suggest time may not be on their side.
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