Activists lambast Sasol for ‘backtracking’ on emissions reduction
The commitment of energy and chemicals major Sasol to reduce its emissions is likely to come under scrutiny at the group’s AGM in the next two weeks, with shareholder activism organisation Just Share accusing it of showing signs of reneging on its target to cut emissions 30% by 2030.
Robyn Hugo, director of climate change, said the management of Sasol, the single biggest emitter of carbon emissions in SA’s listed market, is not disclosing adequate details to its investors.
“All of Sasol’s major shareholders have made commitments to their clients that, although they do not think it is appropriate to divest from Sasol, they are very conscious of the climate risks posed by and to the company, and they believe that the best way they can address those is by engaging with management to ensure that Sasol commits to and achieves appropriate decarbonisation,” said Hugo.
“Institutional investors will need to explain to their clients why their efforts have failed, and then, why they believe that continued investment in what is increasingly becoming a stranded asset, is good for their long-term investment outlook.”
Just Share’s concern comes from what Sasol executives said in its annual report, published in September.
The shareholder activist group says Sasol appears to be back-pedalling on its renewables commitments.
The organisation accuses Sasol of buying time to integrate 600MW of renewable energy in its energy business by 2025, and has instead pushed this to 2026.
Just Share also questions the commitment Sasol made in 2021 to replace coal with gas as a feedstock for its Secunda operations.
“Sasol is now emphasising that the use of ‘transition gas’ is ‘subject to economic viability’ and acknowledges that LNG is unaffordable. Despite this and the other challenges it identifies as gas related, Sasol does not explain what its Plan B is if it turns out not to be economically viable to use gas (which was foreseeable, and foreseen, at the time of the adoption of the target),” the group says in its report.
Almost 84% of Sasol’s total scope 1 and 2 greenhouse gas (GHG) emissions are from its Secunda operations, with 8.4% from its Sasolburg operations.
The group recently impaired about R35bn in its Secunda liquid fuels plant in Mpumalanga, which attracted the attention of authorities for its high emissions.
The national air quality officer in July rejected Sasol’s request to measure the sulphur dioxide emissions from its Secunda boiler plant in an alternative manner, putting the petrochemical giant at risk of violating the country’s air quality laws and facing legal consequences.
Sasol group CEO Fleetwood Grobler in the company’s climate change report said the group had limited control over factors such as exchange rates, oil prices and market demand for its products.
“In 2023 we also witnessed the growing adoption of legislative and regulatory measures hindering participation of developing countries, such as SA, in the emerging low-carbon sectors of more advanced economies. A further complicating factor is access to the national electricity grid... all these variables affect the affordability of our road map, which, to be achievable, has to be affordable.”
It is these comments and others that Just Share says point to the company getting cold feet on following through on its commitments.
However, Sasol on Thursday said it remained committed to achieving its emissions reduction targets and that the key levers remain renewable energy integration, coal reduction through boiler turndown and energy/process efficiency improvements.
“In this regard, we have disclosed the key risks, outside of our locus of control that may impact our transition journey including a stable and reliability electricity grid, renewable energy grid allocation by the SA government, delays in regulatory approvals for renewable projects, macroeconomics and pricing of LNG, among others,” said a Sasol spokesperson.
“It is misdirected to view disclosure of these risk factors as Sasol conceding to not meeting targets. It is consequently also misleading to report it as such. We remain committed to our reduction targets and are progressing all reasonable available avenues to unlock related barriers in this regard...we reiterate that Sasol has not changed its emission reduction target, associated levers or strategy. In 2023, we have provided clarity on the affordability of LNG to supplement production while we decarbonise. Notwithstanding, LNG is not required to meet the 2030 targets.”
Sasol, valued at about R150bn on the JSE, said to date it has exceeded its 2026 renewable energy commitment, signing more than 600MW of renewable energy power purchase agreements and has made progress in reducing its GHG by 2026 for the energy business in SA.
Old Mutual, which holds shares in Sasol, in April called out the company’s “vague” decarbonisation blueprint.
“While it is a large employer and a key contributor to SA’s GDP, we remain concerned about the long-term implications of its climate impact and its stranded asset risks. We feel the company has failed to communicate a clear strategy that would resolve or improve its current climate metrics and carbon emissions,” Old Mutual said.
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