30% GHG emission reduction by 2030 not enough

In September 2021, Sasol announced disappointingly modest and self-contradictory plans to reduce its carbon emissions by 30% by 2030.

As the company heads towards its 2021 shareholder AGM on 19 November, at which it will table its own non-binding vote on its emission reduction plans, this press briefing note outlines our response to Sasol’s latest targets.

It’s no coincidence that this announcement came just weeks before what will, one way or another, be another milestone global climate summit, at COP26 in Glasgow in November. But this announcement shows that Sasol remains reactive, not proactive, when it comes to issues of the energy transition (from fossils to renewables) and climate.

Sasol claims that they support the Paris climate agreement – but their GHG emissions reductions proposals are still not fully compatible with a 1.5C Paris trajectory, as they concede in their latest Climate Change Report, much less what is actually safe for South Africa, which is warming at more than twice the global average warming rate.

This fundamental failure of leadership, combined with their past history of missing GHG emissions reductions targets, and the fact that their emissions have actually increased every year since 2019 (when they first set a GHG emission reduction target of 10% by 2030), suggest they continue to face substantial medium- and long-term technological, regulatory, social and stranded-asset risk.

So-called ‘natural gas’ a myth

To reach its 2030 emission reduction targets, Sasol will rely heavily on securing sufficient, affordable fossil (“natural”) gas, plans which are by no means assured.

Even if adequate quantities of affordable fossil gas are available, it cannot be emphasised enough that fossil gas is not a climate solution, as was made clear by the most recent report of the UN Intergovernmental Panel on Climate Change. Methane, the biggest constituent of fossil gas, is a GHG more than 80 times more potent than CO2, and is often leaked in large quantities in fossil gas value chains. (Satellite observations revealed a substantial methane plume near Sasol sites in June this year, but Sasol disclaimed responsibility.)

Capital spent on natural gas not only postpones spending on renewables, but creates a substantial risk of further lock-in to harmful fossil fuels.

Sasol still looks like an unassailable behemoth. But in a world where there is an accelerating renewable energy transition, and people are becoming ever more informed, concerned and outraged about climate breakdown, Sasol’s business model is falling apart a little bit more every day: a fundamental betrayal of long-term shareholders and other stakeholders.

Sasol is nowhere close to embracing the wholehearted transformation that has been undertaken by companies such as Denmark’s Orsted, which has moved from being a major carbon emitter into a green energy leader with a market cap far exceeding Sasol’s. Sasol’s overall strategy and approach remains conservative and reactive.

Sasol is the second-biggest emitter of GHGs in the world’s 12th biggest GHG-emitting economy. It’s one of the world’s biggest coal-mining companies. It emits more GHGs than several entire countries: in 2017, its emissions surpassed those of Denmark, Finland, Hungary and Iceland. It’s a beloved investment choice for South African asset managers who rarely exclude Sasol from portfolios.

Sasol has managed to carve out huge 90% exemptions from SA’s carbon tax. But it’s highly ineffective at delivering fuel price stability to SA consumers, making the case for continued subsidies and exemptions very thin. None of this is changed by these new targets, and until the company demonstrates increased ambition and an ability to actually meet their targets, no-one should assume there has been any fundamental transformation here.

R60 billion climate damage annually

The social cost of carbon is “the dollar value of the total damages from emitting one ton of carbon dioxide into the atmosphere”, sometimes described as “the most important number you’ve never heard of”. Some US government estimates for the social cost of carbon run as high as $126 / tonne for 2021, and these costs escalate every year that humanity delays adequate climate action.

Even when using a very conservative social cost of carbon at $60 per tonne of CO2 (less than Exxon Mobil’s internal carbon price of $80/tonne), the cost to humanity in climate damage from Sasol’s declared FY 2021 carbon emissions of 67 102 kilotons of CO2 was approximately R60 billion.

This number is not declared or discussed in Sasol’s report, but puts Sasol’s claim to be embracing a just transition in context: Sasol’s efforts to do justice to people affected by its emissions must be in proportion to the damage being done.

New declared targets

• “Support the objectives of the Paris climate agreement.”
• Reduce its Energy Business and International Chemicals Business scope 1 and 2 GHG emissions by 30% by the year 2030.
• Reduce scope 3 category 11 (use of sold energy products) GHG emissions for the Energy Business by 20% by the year 2030.
• Reach net zero emissions by 2050 for scope 1, 2 and category 11 scope 3 GHG emissions for the Energy Business by “decarbonisation of assets”, energy efficiency (good), investments in renewables for electricity supply – Sasol is procuring as much as 1 200MW (of which Air Liquide is allocated 400 MW) (good) – and shifting to using “natural” gas (alarming).
• Until 2030, spend approximately 10% to 15% of capital to achieve GHG emissions targets, after which a more significant portion of capital (“vast majority”) will be used to achieve net zero emissions by 2050.

On the face of it, this seems like a big step forward for Sasol. But South Africa is a country that is particularly vulnerable to climate breakdown and global heating. Our rate of warming is double the global rate of warming on land, the global rate of warming on land is higher than the global average, the global average is currently headed for 3C by 2100, and the global average might still be an under-estimate by scientists who are, unfortunately, constantly being surprised by new signs of a breaking climate: record droughts, fires, storms and temperatures, and melting ice sheets.

SA scientists agree that on current global trends, we face more than 6C warming in SA by 2100. Even higher extremes will hit cities due to urban heat island effect. So, as a company with an enormous legacy of pollution and with a profound historical debt to an especially vulnerable country, Sasol’s true responsibility is to transform even faster than other countries and companies.

But Sasol has never even met any of its past targets for GHG emissions reductions, as a 2019 exposé from Moneyweb’s Patrick Cairns showed very clearly.

“Its regulatory performance and past record in environmental compliance have been poor,” observe the analysts at Global Climate Insights.

Sasol frequently breaks environmental laws. Just last year, it violated conditions of its environmental authorisations, waste management licenses and air emissions licenses; exceeded even the relaxed minimum emission standards it had lobbied to have applied, polluted groundwater, acted without required environmental approvals; and criminally mismanaged waste. These are recent offences under current management.

Their new capital expenditure plans make nonsense of their declared targets. Meeting climate targets demands that most capital expenditure on reductions comes well before 2030, not after, given that the climate science makes clear that globally, emissions must reduce by about 50% by 2030.

Despite their claims to support the Paris agreement in principle, this is not a 1.5C Paris-aligned set of targets as they themselves concede. Genuine Paris-aligned targets require annual cuts of at least 7% to 10% of GHG emissions until 2030.

Sasol claims that these new targets will help it fulfil South Africa’s national emissions reductions targets. But SA’s national targets still fall short (see the CER’s analysis of recent increased ambition in SA’s national climate targets) of what is required to meet Paris, much less a global climate safe for South Africa.

Good intentions and slick PR are not enough for a company with Sasol’s long and deep record of climate damage, extreme pollution, corporate arrogance, fighting democratic regulation, covert lobbying of government and missed targets for a wide range of emissions reductions.

These factors taken together show that Sasol is not in fact showing leadership, but is rather running a PR exercise designed to give asset managers and favoured stakeholders some excuse for remaining invested and engaged, attempting to maintain some level of credibility in a global business culture that is fast coming to accept the necessity of serious climate action.

It is widely accepted that the world faces a climate emergency, a situation which demands urgent, visionary action – yet Sasol is quite deliberately avoiding a “big bang” approach.

Are net-zero plots just an act?

The pathways that Sasol and other fossil-fuel companies plot towards “net-zero” emissions are deeply problematic, as they are often used cynically to give the appearance of acting, while in fact simply deferring accountability for corporate criminal behaviour to later generations of management.

Sasol’s plans for scaling up fossil gas show they’re throwing the most damaging solutions at their problems. A more credible plan would involve mostly renewables and a minimum of gas, but the Sasol plan is mostly gas and a minimum of renewables.

Fleetwood Grobler, the Sasol CEO, is 60, and likely to have retired long before he is ever called fully to account on meeting these targets.
A net zero target usually involves plans for carbon sequestration, but Sasol acknowledges that carbon capture, so-called “clean coal”, is unlikely to be practical. Here we agree with them. The cheapest way to deal with emissions is always going to be not emitting them in the first place.

Part of Sasol’s response to the likely end of the era of GHG-emitting liquid fuels has been to invest in plastic feedstock manufacture (its Lake Charles facility in the US). But a business and leadership model that merely switches from fostering one kind of environmental crime to another is no real solution. Sasol’s contribution here is to help put the plastics industry on track to surpass the GHG emissions of coal in the US.

Should investors who have divested from Sasol now re-invest in Sasol?

At least one South African ESG equity fund has, commendably, been established with a hard screen against Sasol. Reinvestment in Sasol might be reasonable if the company had already demonstrated a thorough meaningful commitment to energy transition and to ending the burden of their emissions on South Africans and the world. But they have a long way to go before that commitment is clear.

Investors should wait at least five years to see if the company:

• Adopts targets that match the technical ambition of Paris and the moral ambition befitting a company that does business in one of the most climate-impacted regions of the world.
• Shows evidence within 2–3 years of being on a strong emissions reduction curve towards 2030. Because 2030 is a long way off, inaction before 2030 poses extreme climate risks, and we cannot wait till then to see if Sasol is serious about their targets.
• Commits to fully meeting legal obligations on other pollutants such as sulphur dioxide and hydrogen sulphide.
• Establish climate targets that meet or exceed the ambitions of Paris.

Actions Sasol can take today to show they are serious about ‘going green’:

Sasol might respond to these criticisms by saying it is serious about emissions reductions, but that it will need time for new capex to show results. We remain sceptical that this particular leopard has really changed its spots, but if we are wrong, here are just some of the immediate steps Sasol could take to demonstrate seriousness while we wait to see genuine GHG emissions reductions:

• Be more forthright about acknowledging that its current plans are not Paris-compliant, and even less compliant with a global climate that’s safe for South Africans. (Even if the world meets the 1.5C Paris ambition, SA still faces more than 3C of warming by 2100.)
• Accept all climate-related resolutions proposed by shareholders. They currently, unlawfully, decline to table such resolutions, and have now done so six times in a row.
• Fully support the Carbon Tax with an end to exemptions.
• Fully disclose their lobbying activities.
• Comply with the air quality laws they only “hope” to comply with by 2025.
• Greatly improve the disclosure of their methane LDAR (leak detection and repair programme), which is at present far from comprehensive. (Methane is more than 80 times more potent than CO2 as a GHG.)
• Commit to accepting and facilitating human rights monitoring and reporting on their current Mozambican gas field activities.

Assessing fossil fuel companies’ plans for self-reform

When assessing the “green” ambitions of fossil fuel companies coming to grips with the new realities of the Anthropocene, we must ask:

• Are they changing fast enough to match the scale of the climate crisis we face, or using Net Zero targets as cover for expanding fossil fuel production?
• Are they responding proactively, or doing the minimum required to suggest they understand the regulatory and social context brought on by climate breakdown?
• Do they have a track record of setting targets for change and meeting those targets?
• Are they honouring existing commitments and regulatory requirements on pollution?
• Are they committed to honouring the human rights, social and democratic context in which they operate, or do they seek more to manipulate that context to suit their own ends?
• Do they respect all stakeholders, or are they focused principally on shareholders?

Fossil fuel divestment

Climate breakdown continues to accelerate and global efforts to stop climate breakdown by governments remain woefully inadequate. The main cause of climate breakdown is the burning of fossil fuels: coal, gas and oil.

Despite claiming to accept the science of climate change, fossil fuel companies continue to extract and sell coal, gas and oils at rates far surpassing what scientists consider to be compatible with a stable climate. Fossil fuel companies have spent hundreds of millions of dollars ​creating confusion about climate science​, and greatly exaggerate their paltry renewable energy commitments in their marketing. They pay fortunes to lobbyists working to water down climate regulations and actively corrupt government officials who should be protecting the public.

In response, since 2012, the global fossil fuel divestment movement has grown to encompass assets worth over $14 trillion dollars (see the full list of commitments ​here​). Over a thousand cities, universities, foundations, pension funds and religious institutions have made commitments to ending their fossil fuel investments. These institutions include the cities of London, New York, Cape Town, Paris, Melbourne, European insurance giant Axa; and most recently, Cambridge University, Harvard and Durban.

This movement began as a moral movement to demonstrate that fossil fuel companies have become systematic human rights abusers, but has also begun to affect the cost of capital for fossil fuel companies.

About Fossil Free South Africa

After eight years of campaigning, in August 2021 Fossil Free South Africa‘s activism helped persuade the University of Cape Town’s responsible investment panel to make a strong recommendation that the university should divest completely from fossil fuels by 2029. This followed their long-term lobbying for divestment, with support from Archbishop Emeritus Desmond Tutu, which pushed UCT to become the first university in Africa, and perhaps in the entire Global South, with a responsible investment committee.

Other FFSA achievements include, with 350 Africa, nudging the City of Cape Town to become the first African city to commit to divestment in 2017; holding workshops on divestment for asset managers in 2017, for pension funds in 2019 (in partnership with the UN Principles for Responsible Investment) and running an ongoing campaign to pressure on asset managers to create fossil-free funds (do sign on if you’re one of their clients, please).