Sasol links executive pay to climate-change targets
The company will move to ensure accountability as it aims to reduce its carbon emissions
Sasol will link executive pay to its climate-change targets as the chemicals and synfuels giant and SA’s second-largest polluter
looks to clean up its act and in what is likely to be a shake-up of its business model.
At a briefing on its recently released climate-change report on Tuesday, Sasol laid out its plans to reduce emissions from its operations by “at least” 10% by 2030 as it faces increasing pressure from activists but also from investors.
It will require Sasol, SA’s largest emitter of greenhouse gases after power utility Eskom, to transform its lucrative synfuels operations in Secunda, which remains the core of its business and accounts for 85% of the group’s emissions.
SUSTAINABILITY RISK
Using coal-to-liquids technology, Secunda produces 160,000 barrels of synthetic fuels a day and emits 56-million tons of carbon dioxide a year. As such, it poses a major sustainability risk to the company.
The climate-change report is the first step in a journey to meet its 2030 target, the company said. Although details have yet to be fleshed out, linking Sasol executive pay to the company’s climate-change targets is an integral part of the plan.
“We are looking at what the short- and long-term incentives could look like, but also what key performance indicators would have to change in order to address this,” said Shamini Harrington, Sasol vice-president for climate change.
Investors are, however, worried that Sasol’s interventions will not go far enough.
Ahead of Sasol’s upcoming annual general meeting, a group of institutional investors consisting of Old Mutual Investment Group, Sanlam Investment Managers, Abax Investments, Coronation, AEON investment management and Mergence Investment Managers jointly filed a shareholder resolution seeking greater transparency from the company on how its long-term greenhouse gases emission-reduction strategy and executive rewards align with the Paris climate accord.
The accord, which was ratified by the government in 2016, aims to limit global temperature increase to 1.5°C.
The investor resolution was, however, rejected by Sasol on the basis that the matters raised have been dealt with in the climate-change report.
Jon Duncan, head of responsible investment at Old Mutual Investment Group, said that although Sasol has committed to provide more information in an emission reduction roadmap by November 2020, the group of investors remain concerned about the lack of detail on whether the disclosures therein will be aligned to the Paris accord and exactly how targets will be linked to executive remuneration.
Tracey Davies, director of Just Share, a nonprofit shareholder activist and responsible investment organisation, agreed that the extent to which remuneration is linked to the targets is important and that these should also be aligned with the Paris accord.
At the moment, “none of it is Paris-aligned, it’s based on its ‘doability’.” The 10% reduction will, however, be easily achieved given technological developments in this field, Davies said.
SHAREHOLDER VOTE
Duncan said that a shareholder vote on these issues “would have allowed Sasol to test shareholder appetite for such disclosures and, if passed, would have provided clarity on parameters for future climate disclosures”.
Harrington said that although the target might not yet be fully aligned with the Paris goals, “it is certainly on track with a developing-country view, taking into account all the various factors around socioeconomic contributions and what the country needs in terms of reducing emissions and growing the economy”.
She added that Sasol aims to increasingly align itself with the Paris accord.
WE ARE LOOKING AT THE INCENTIVES, BUT ALSO WHAT KEY PERFORMANCE INDICATORS WOULD HAVE TO CHANGE
THE LINK IS IMPORTANT, BUT AT THE MOMENT, NONE OF THE TARGETS IS PARIS-ALIGNED, IT S BASED ON ITS ‘DOABILITY’