28 October 2021
Over the last year, diversified miner South32 has set a target to halve its operational (scope 1 and 2) emissions by 2035 and reach net zero by 2050. However, as a significant metallurgical coal producer, the scope 3 emissions (mostly those generated from the use of South32’s products) are five times higher than scope 1 and 2 combined.
South32 is a focus for the Climate Action 100+ investor group, which calls on 161 of the world’s largest carbon emitters to reduce emissions across their entire value chain in line with the Paris climate goals. The reference to
“value chain” emissions raises the expectation that companies will put in place targets and strategies to reduce scope 3 emissions.
In particular, the CA100’s net zero benchmark seeks 1.5°C-aligned emissions targets for scope 3 emissions, which South32 has so far failed to set.
At today’s AGM, the company was asked why it had failed to set short, medium, and long-term targets for these emissions, and what action CA100+ investors, and lead investor Hesta will take against the company if it continues to fall short of the initiative’s benchmark.
No commitment to walk away from coal expansion project
South32’s proposed Dendrobium Next Domain project to extend the life of its Illawarra metallurgical coal mine was rejected by the NSW Independent Planning Commission in February, with the IPC noting “the potential for long-term and irreversible impacts — particularly on the integrity of a vital drinking water source”.
Following that decision, and given South32’s support for net zero emissions by 2050, and the International Energy Agency’s finding that there is no room for new or expanded coal mines in a net zero by 2050 scenario, the company was asked if it would walk away from the project.
However, Chair Karen Wood and CEO Graham Kerr both confirmed the company is working on revised plans for the project, which the company expects will be completed by the end of the year.
South32 also confirmed reports it is planning to divest its 50% stake in undeveloped Eagle Downs metallurgical coal project, and recently completed the lengthy divestment process of its South Africa Energy Coal Business.
Along with the Dendrobium / Illawarra project setback, shareholders wondered if the company is looking to exit coal production altogether, but Ms Wood said the company has no exit plan for metallurgical coal.
The Australasian Centre for Corporate Responsibility raised concerns about the potential for coal asset divestments to hand over responsibility for climate and other environmental and social impacts to parties less likely to manage and reduce those impacts. Ms Wood agreed this was a concern, but that it needed to be balanced with duty to not destroy value for shareholders.
A shareholder proposal lodged by ACCR, calling on South32 to strengthen its review of industry associations to ensure that it identifies areas of inconsistency with the Paris Agreement was supported by the board and 98% of shareholders.