Why is there still a debate about Net Zero?

I was driving home from Pretoria to Johannesburg on the R21 on Sunday, when I saw a massive billboard which read: Net Zero is a hoax to enslave you. Despite empirical evidence that environmental and social governance is gaining momentum worldwide, it surprises me to see narratives such as this.

What evidence is there that ESG is gaining momentum? Take a closer look at Sasol’s latest challenges to influence your opinion.

The News24 article points out that Sasol shareholders were due to vote on its climate report on 17 November, and the company would likely have faced tough questions from stakeholders. Instead, Sasol cancelled the AGM after the protestors continued to disrupt the CEO’s speech.

After almost an hour of technical difficulties with its live-streaming AGM, Fleetwood Grobler, the outgoing CEO of Sasol, had only been talking for a few minutes about how deeply one of the country’s biggest emitters of greenhouse gases cares about people and the planet before he was interrupted by a dozen protestors.

The article adds that some activists gave personal testimonies about their health, their families and what it’s like to live with the group’s pollution before others took to the stage and chanted slogans such as “we want to breathe” and “shame on Sasol”.

Sasol currently accounts for about a fifth of South Africa’s greenhouse gas emissions.

Open invitation

The News24 article points out that, in a statement, Sasol chair Stephen Westwell said he had invited the protestors to a meeting with Sasol directors, which was declined.

“Once it became clear that the protesters would not accommodate the effective participation of other shareholders, cancelling the meeting became the only prudent option, as the chairman was inhibited from effectively communicating with the shareholders present at the meeting,” the statement said.

Sasol says the protestors dispersed without incident after the meeting was cancelled.

“Sasol was very quick to cancel the AGM, and it’s a huge pity because we wanted to see the outcome of the non-binding vote on the climate report,” said Tracey Davies, executive director of Cape Town-based shareholder activist group Just Share.

Shareholder protestations

The News24 article points out that two of South Africa’s largest institutional investors, Old Mutual and Ninety One, said they would vote against the group’s climate report at the meeting. Old Mutual objected to Sasol’s poor track record in achieving climate targets and contended that the shareholder resolution, which was subject to vote, makes no reference to targets, which was “a step backwards”, as resolutions in previous years did.

Old Mutual also urged other fund managers to vote against the implementation of Sasol’s remuneration strategy, because climate-related targets used to determine executive pay are being postponed as they haven’t been achieved.

Hefty emissions

The News24 article points out that Sasol’s 2023 Climate Change report showed its scope 1 and 2 emissions, or both direct and indirect, rose about 0.86% to 62.3 million tonnes of carbon dioxide equivalent from 2022. Its emissions were affected by the ramp-up of its US Lake Charles project. But, it added, they are down 5% from 2017, though product volumes were also relatively lower.

Production levels are expected to increase in 2024, resulting in a higher emissions profile for Secunda, it said, but it still believes it can reduce its greenhouse gas emissions by 30% by 2030.

The News24 article points out that Sasol set a greenhouse gas emission target in 2005 of at least a 10% reduction over 10 years in emissions per ton of product, which is its so-called emissions intensity.

It was measured at 2.88 in 2005, although this figure was later restated at 3.12. In 2023, Sasol’s greenhouse gas intensity was instead 4.12, 32% higher than the restated 2005 figure, according to data compiled by Just Share.

Sasol responded by reiterating its commitment to the target and called the report misdirected and misleading.

“Sasol has constantly communicated that it is not in a position to follow a smooth year-on-year emission-reduction trajectory, as is done with most climate models, because our operations are highly integrated with long lead times needed to integrate capital-intensive emission-reduction projects,” the company said earlier this month.

Its first tranche of renewable energy, the Msenge wind farm in the Eastern Cape, will come online in coming months and will enable green hydrogen in Sasolburg.

“[The AGM mayhem is] absolutely the result of two decades of the chickens coming home to roost for Sasol,” Leanne Govindsamy, programme head of corporate accountability and transparency at the Centre for Environmental Rights, told News24.

Shareholder influence matters more than the science

While there are some concerns about whether the science regarding Net Zero makes sense, shareholder influence matters more at this stage.

The fact that Old Mutual can take a specific position against Sasol and then rally other shareholders to do the same means that shareholders hold a powerful influence in the Net Zero debate.

It is time for companies to reassess their cautiousness regarding this because neglecting ESG can have a material impact on financial distress.