JSE-listed cement and building materials producer PPC is to spend R664 million over its next three financial years to reduce its carbon emissions by 10% and has developed a strategy to achieve net-zero emissions by 2050.
PPC CEO Roland van Wijnen said on Monday that if PPC manages to reduce its carbon intensity by 10%, it will also reduce its carbon tax bill by 10%.
But he stressed that the strategy is not just about reducing its tax obligations.
“There are also benefits on production costs. If we, for example, reduce the amount of clinker in our cement, we reduce CO2 but we also reduce costs,” said Van Wijnen.
“So all projects that are part and parcel of the R664 million capex are value-accretive,” he said following the release of PPC’s inaugural Task Force on Climate-related Financial Disclosures (TCFD) Report.
The report outlines the company’s assessment of climate change-related risks and opportunities and its sustainability solutions.
“This report represents the first steps of PPC’s net-zero journey,” said Van Wijnen.
“It does not provide all of the solutions to the climate change challenges we face, rather, it sets out what we have learned about the impact of climate change on our business and our carbon reduction ambitions in the short-, medium- and long term.
“It also highlights PPC’s commitment to playing its part in contributing to emissions reductions and climate change mitigation for the sector in Africa,” he said.
Van Wijnen said PPC is not aware of any of its cement competitors in South Africa publishing a similar carbon reduction strategy, but internationally, especially in Europe, the major producers have done so.
He said Sasol has announced carbon reduction targets in South Africa but is unsure whether it followed TCFD, which was established by the Financial Stability Board in 2015 to provide a framework for organisations to better understand and effectively deal with and develop climate related strategies.
Van Wijnen said the initiatives to be implemented during the next three years in terms of the R664 million in capital expenditure are to some extent integrated into PPC’s normal future capex plans.
He said PPC provided guidance to the market last week that it annually spends between R500 million and R550 million on its capital programmes and part of the short-term R664 million carbon reduction costs are included in this.
Van Wijnen added that an additional about R300 million in capital expenditure for one specific project over two years will come.
“Given the fact that we are in a much better financial position than previously, we expect we will be able to finance this [R300 million] out of our normal cash flows.
“We are at the same time engaged with our prime lenders to identify ways how we can use some of the incentives around green funding for some of these projects,” he said.
Van Wijnen said in the short term, PPC believes a 10% reduction is feasible from its current 756kg of CO2 per ton of cementitious materials to 680kg or less by its 2025 financial year and has set aside R664 million over that period to achieve that target.
He said the next step is a 27% reduction in its carbon emissions by its 2030 financial year, when the group expects to be at 550kg of CO2 per ton or less.
Van Wijnen said PPC has a very good idea of what it wants to do to achieve its 2030 financial year target, but has not yet disclosed the capital expenditure that will go hand-in-hand with that.
The simple reason for that is that there are still many assumptions that need to be validated and verified before PPC has a reasonable certainty around these numbers.
The long-term target is also heavily dependent on a regulatory framework and the speed and cost of innovation, he said.
Group effort globally
“I truly hope that we will see as a world that we come together, share new ideas to implement this imperative and we do not do the same as what happened last Friday when the new variant of Covid-19 was discovered in South Africa and we got literally punished by various countries in the world.
“If we want to be successful in defeating Covid-19, or to deal with climate change, this has to be an effort that is done by everyone together,” he said.
Policy and opportunity
Kribs Govender, PPC’s technical head for its South Africa and Botswana operations, said PPC in the short term is looking at using waste materials, including tyres, as part of the feedstock into its kilns for energy.
“We need to firm up on that side with regard to policy and policy certainty. We are engaging with [government] on that in terms of getting some certainly but also in terms of shaping it and giving our inputs into it,” he said.
Van Wijnen said there are opportunities for new revenues from South Africa’s energy transition, which will require huge amounts of concrete for the renewable energy programme, particularly solar power.
But he said there will be other opportunities that will come out of building materials that PPC might yet not have full sight of.
“As PPC, we will be at the forefront of building materials that come with less carbon intensity than the ones we know today,” he said.
Van Wijnen said emissions reductions will require investments in mitigation technologies that are currently largely undeveloped.
Purposeful public and private sector collaboration is key to mapping a pragmatic way forward for new technologies and innovations as well as supportive policy and investment frameworks to be developed to enable a net-zero future, he said.
Shares in PPC rose 5.21% on Monday to close at R5.05 per share.