24 October 2019
South32’s failure to bring forward emission reduction plans and commit to addressing downstream emissions leaves the company behind its big mining peers.
Diversified miner South32 today confirmed it won’t be updating its emission reduction plans and targets until 2021. This will leave the company behind its big mining peers BHP and Rio Tinto, which have both committed to setting new targets in the next year.
Significantly, company Chair Karen Wood could not commit South32 to setting targets to reduce its scope 3 emissions in line with the climate goals of the Paris Agreement.
Scope 3 emissions include those generated downstream of the company’s operations as customers use its products. South32, a large coal producer, has a huge scope 3 emissions profile.
South32’s significant exposure to industries that need to decline or decarbonise in order for the world to meet its commitments under the Paris Agreement – such as steelmaking – presents major climate change transition risks to the company. Failure to address scope 3 emissions amounts to a failure to manage climate risk.
Chair Karen Wood could not commit South32 to setting targets to reduce its scope 3 emissions in line with the Paris Agreement… Failure to address scope 3 emissions amounts to a failure to manage climate risk.
While the proof will be in the pudding, BHP has at least committed to setting public goals to address its scope 3 emissions in 2020. Importantly, BHP has said that these goals will be independently verified for compatibility with the Paris climate goals.
For its part, Rio Tinto has partnered with its biggest iron ore customer to investigate ways to reduce emissions. While this is a far cry from Paris-aligned targets, at least Rio have put something on the table to address scope 3 emissions; South32 have done nothing in this regard.
South African thermal coal expansion
Two years ago, South32 announced plans to sell off its South African Energy Coal (SAEC) business, citing a poor outlook for thermal coal demand as a driving reason for the divestment.
The sale process has dragged on, and in the meantime South32 has invested hundreds of millions of dollars to expand the projects and extend its life for 20 years. This extension is totally inconsistent with the Paris Agreement climate goals, which require the phase out of coal power in Africa by 2034.
When questioned by shareholders about the SAEC business, responses from Ms Wood and CEO Graham Kerr suggested South32 could be passing the buck for both climate risk and rehabilitation costs. Mr Kerr pointed to the particularly high closure liability costs of SAEC as a reason for choosing to sell the business rather than winding up and rehabilitating the site. It sounds like South32 doesn’t want to have to pay to clean up its own mess!
In selling the business, South32 will also pass on the risk of SAEC’s coal becoming stranded as a result of the market and regulatory action that’s needed to meet the climate goals of the Paris Agreement. South32 has been vocal on its dim view of the prospects of thermal coal, but seems happy enough for a buyer to take the gamble that the world won’t act in line with the climate commitments ratified by over 180 nations.
South32’s expansion and extension of its South African thermal coal business, and failure to set Paris-aligned emission reduction targets across its entire supply chain mean it is actively undermining the climate goals of the Paris Agreement.
Find out if your super is invested in South32 and other climate-wrecking companies and take action: marketforces.org.au/outofline