NOMPU SIZIBA: Sasol hosted a climate-change media round table today, November 11, 2020. It said that Sasol and Eskom are the biggest carbon emitters in South Africa, given the nature of their businesses. And, with sustainable development of key importance, leadership at institutions like these has to be seized with how to operate differently and, most importantly, sustainably. It’s good to know that this is a priority for Sasol, which shared some of its climate-change mitigation plans today. Also, shareholders are increasingly becoming insistent on the companies that they invest in being conscious of operating with the environment, social issues and governance imperatives in mind.
Well, to tell us more about what’s on their minds, I’m joined on the line by Fleetwood Grobler. He’s the Group CEO at Sasol. Thanks very much, Mr Grobler, for joining us. Now you delivered a presentation today on Sasol’s climate-change mitigation efforts. Being a very significant carbon emitter, or polluter, what are your plans around being active in mitigating climate change, and how will the structure of your operations have to change in order for you to limit your carbon emissions in the future?
FLEETWOOD GROBLER: Thank you. We articulated this morning and made reference to our climate-change report that we published in August this year. In that we clearly indicate the trajectory and how we go about really making impacts on this greenhouse gas-emission reduction. In essence, it entails a three-step process that will play out over a period of time.
The first part of it is to reduce. We would like to employ all efforts and technologies we can to reduce the consumption of energy. Let me put that into the following three categories. We buy in electricity from Eskom. So, if we reduce that energy that we buy as electricity from Eskom, we reduce our footprint by replacing it with renewables. The footprint that comes with electricity, because it’s coal-generated, will be reduced or will go away if we replace it by renewable electricity. That’s the first one.
The second one is to reduce all energy consumption where we can within our processes that we employ. So that means if we can use less steam, if we can use the energy of the steam that has been used, and it’s not just discarded, if we can use more energy-efficient motors or equipment that we employ in our operations, and we can run our operations at the sweetest spot where there are less emissions through flaring and so on, that means we employ digitalisation methodologies to run the plant at the sweetest spot with fewer upset conditions. All of those are the first port of call to reduce energy consumption, which then directly reduces the use of coal that comes with a carbon footprint.
NOMPU SIZIBA: Just to interrogate what you were saying, Mr Grobler, around the issue of reducing the amount of electricity you take on from Eskom, as an example, what about the argument that very intensely industrialised companies say that it’s quite difficult to rely on renewables for bulk energy in order for them to be efficient. What about that challenge?
FLEETWOOD GROBLER: Yes, that is a real challenge. So you need to look at the suite of renewables that you would employ. If you argue that the sun is only shining in the daytime, where do you get that renewable energy in the night time? Wind energy is there 24/7. There’s wind not only during the day, there is also wind at night. That is the one aspect.
The other aspect is that you need to think about how to complement that through gas generation of electricity, not only coal generation, because if you move from coal electricity generation to gas generation, you’ve got about a 60% reduction in carbon footprint. So, when we look at bringing in renewables, it goes without saying that you need to look at the suite of renewables, and you also need to think about how that can be complemented with gas through the peak loads and the 24/7 relatable supply of that.
NOMPU SIZIBA: Now, given what you say about coal, what’s the future of coal in Sasol’s operations?
FLEETWOOD GROBLER: I must just qualify that – coal is the feedstock we using. There is no technology and no alternative feedstocks in the next five to 10 years to really say coal is no longer a feedstock that we will use. We will reduce the use of coal over time, based on alternative options for feedstock. That means we need to ensure that we’ve got feedstock like gas coming into South Africa.
Again, I want to emphasise, it is not like throwing a switch on a light. You can’t say, “I want gas,” and the next day, while there is gas in your operations, you need to collaborate. You need to work with partners. You need to work with governments. You need to work with upstream gas suppliers that will make it available. You need to think about the infrastructure it will take to bring it into South Africa.
For example, we see liquified natural gas, LNG, as an option, but a bridging option at best, because of the cost of LNG being much higher than pipeline gas. For example, the gas we bring in from Mozambique, compared to LNG on a cost basis, is much more affordable. And therefore, if we look long term, bringing in more gas to South Africa has to be on a pipeline basis as the affordability is increased through that type of infrastructure, compared to an LNG play, which is, as I say, at best a bridging option.
So all of those things must be in play so that you can say, “Now I’ve got to adjust transition to start shifting from coal to more gas”. And in that quest, as you reduce your consumption of coal, you need to also ask, “How does that impact my jobs? How do I transition those jobs into alternative job creation?”
So, if I look at the quest to go renewables in South Africa, if we look at mining operations in Mpumalanga, the right thing would be to engage with our labour partners and with employees to say, as we shift to more renewable, it is about the manufacturing of those renewable kits as well.
And can we then move the labour that is going into mines more into the manufacturing jobs? That would be a longer-term [task] because, for the next 15, 20, 30 years, South Africa will have a very positive trajectory with renewables, and that could be an industry that shifts then from mining to manufacturing of renewable kits in South Africa, and particularly in Mpumalanga. That could be part of the just transition that we need to make work, so that there’s a real acknowledgement that in the process renewables are not your enemy. They are actually an opportunity to create more jobs for South Africa and engage more people in South Africa in that sector.
NOMPU SIZIBA: This question is related to what you’ve just said. South Africa is obviously a signatory to the Paris Climate Change Agreement, and countries have been encouraged to meet time deadlines in reducing their carbon emissions. What are Sasol’s timelines, and how do you interpret the concept of “just transition” which you’ve just touched on?
FLEETWOOD GROBLER: First of all, we are 100% aligned in all our actions and our roadmaps. And the way that we look at our ambition will be, and is, aligned with the Paris Agreement. I must just highlight for everyone that the Paris Agreement acknowledged the difference between developing countries and developed countries. If I crystallise the essence of that, it means that developed countries have, in terms of infrastructure, access to alternative feedstocks, access to technology, access to, again, infrastructure available. It has to acknowledge that those countries and economies can move somewhat more quickly, and it does allow developing countries like South Africa and most of the other developing countries in the southern hemisphere to also attain those goals under the Paris Agreement, but with a just transition and with some time impact in reaching that ambition.
So it does acknowledge that developed countries can deliver quicker and faster. The developing countries are not off the hook, they still need to do it, But we acknowledge their just transition dilemma in terms of their economies and infrastructure, in being able to catch up with the rest. And that is the trajectory that we are bringing into our ambition and roadmaps.
NOMPU SIZIBA: Has long has Sasol been seized with the issue of reducing emissions? And, if we look at your Lake Charles chemical project, for example, was it designed with climate-change mitigation in mind? Would you describe it as a relatively green project?
FLEETWOOD GROBLER: If you look at it from a perspective, it is taking state-of-the-art technologies with the most energy-efficient plants and processes that we employ into that project. It is the best that you can do from an emissions point of view, that you can build and you can commission. So that is a given. I mean, if I look at our technologies that we’ve implemented and the plants we built in the fifties and in the seventies and eighties in South Africa, our Sasol plants and the world and technologies have moved on.
So you have more efficient electric motors, you do have more efficient systems of technologies that operate, and so on. So that’s just the given. We’ve implemented the lightest, and the most efficient and the most compliant to current legislation, emission regulations that exist in that regulatory framework. We comply to the latest and the greatest. That’s the final summary.
NOMPU SIZIBA: Mr Grobler, just one last issue. NGOs like Just Share, supported by international NGOs, are calling for Sasol to table a climate-related shareholder resolution. But they say that you keep refusing. What are the issues there?
FLEETWOOD GROBLER: Today we announced that we are taking their plea very seriously. We have indicated that, as of next year, we will have a non-binding advisory vote on our climate-change policy and implementation. That is aligned with King IV and South Africa’s Companies Act, where shareholders can use the advisory vote to indicate how to get the board’s attention in the areas where they believe we are not delivering as they would like to see us deliver. What this means practically is, if we don’t attain support from 75% of the shareholders at the next AGM on certain aspects of our climate-change strategy, the board is obliged to engage with those shareholders to understand how we can remediate and how we can step up to the challenges that they indicate to us. I think that’s a well-trialled and -tested mechanism, and we are very supportive that that be implemented, and we will follow suit on that.
But all the formalities aside, that does not mean that we are not serious about climate change. We are committed, and it’s a key tenant of our strategy because we know if we don’t address it Sasol is not viable as a company in South Africa with the products and the fuels that we make. So it is really at the centre of our strategy to make an impact on climate change, and to get it right. So there is no lack of commitment. It is about how to attain it in the most practical and feasible way. The time constraints that I talk about, and the time it takes to develop infrastructure and bring gas, are part of that just transition which we are committed to.
NOMPU SIZIBA: Excellent. That was Fleetwood Grobler. He’s the group CEO at Sasol.