Sasol Climate Change Report 2023 - Book - Page 23
INTRODUCTION
TRANSFORMING FOR RESILIENCE
GOVERNANCE
CLIMATE ADVOCACY AND POLICY
DATA AND ASSURANCE
RESILIENCE OF OUR PORTFOLIO CONTINUED
CURRENT PATHWAY
FRAGMENTED WORLD
• Challenging uneven global economic recovery post the COVID-19
pandemic, increased geopolitical risks and the changing country
priorities versus climate change ambitions, mean that the world is on
track to overshoot the 1,5°C temperature goal, reaching 2 – 3°C.
• Reaching the 1,5°C temperature goal remains aspirational with
amplified geopolitical divisions and economic challenges preventing
requisite technology transfer and funding availability. The
temperature increase is therefore greater than 3°C.
• Climate change mitigation continues to progress in more developed
markets such as Europe and the United States. Many other countries
lag and make intermittent progress, favouring economic growth and
job creation over climate change goals. The Russia-Ukraine war has
exacerbated component supply, supply chain logistics and energy
security issues, some of which started before or during the COVID-19
pandemic. These have become key concerns, with some countries
developing new relationships based on the supply and demand
of energy, other commodities and components. Many developing
countries are also facing food shortages, which need to be addressed
in the short term.
• Many countries are concerned with energy security and ensuring that
supply chains are robust. Self-sufficiency becomes a priority.
• Technology development continues to progress and assist in the
energy transition in certain regions. Some countries are progressing
with electric vehicle roll-out and related infrastructure. Affordability
continues to hamper progress in other economically challenged
regions, including South Africa. Here, adoption of electric vehicles lags
the more developed regions.
• Favourable financing and funding opportunities are available to some
countries and regions for energy transition activities.
• Petrochemical demand increases due to a rising population and
growing middle class, softened to some extent by recycling and reuse.
• Global transport fuel demand peaks only in the early 2030s. Oil-derived
jet fuel recovers slightly relative to pre-COVID-19 levels. By the mid2030s; however, oil-derived jet fuel demand starts to peak and plateau
due to efficiency improvements and new aviation fuel options like SAF.
• Natural gas begins to replace coal demand in the power sector in
developing countries. Renewables generally show improved price
competitiveness over gas and are more widely adopted in developed
economies. Affordability and access to infrastructure remain key
with global gas demand peaking in the late 2030s. Grid expansion
to accommodate the increased sources of new power generation
proves challenging in all parts of the world. South Africa is particularly
challenged by grid expansion requirements and the required
regulatory changes.
• New geographic trade partnerships increase security of supply for
energy and other commodities and components. This increases the
cost of minerals and metals that are key to the energy transition,
which further increases affordability challenges for some countries.
Trade partnerships disadvantage progress in some states.
Describing our qualitative and quantitative
robustness testing approaches
QUALITATIVE ROBUSTNESS TESTING
• We use a grading system to evaluate different elements
of the Future Sasol strategy up to 2030.
• A multi-disciplinary team is convened from different
parts of the company to evaluate the robustness of the
strategy along different themes. These themes include:
– Stakeholder views: tests how shareholders, non-
governmental organisations and government could
respond to proposed updates to the strategy to
2030, including the speed of the transition, emission
reductions and impact on the share price and profits.
• Many countries focus on local economic challenges at the expense
of emission-reduction goals, which delays progress towards climate
change targets. Technology cost increases also create barriers to
progress. Local and regional tensions further contribute to slowing
climate action.
– Dependency of strategy implementation on policy and
• Global liquids demand peaks and plateaus in the 2030s, with jet fuel
showing some growth to 2040 before it starts to decline.
– Market and competitive changes for liquid fuels and
• Electricity demand increases and transitions to greener generation
options are sluggish in some regions. There are, however, challenges
in accessing technology improvements at the required price, as
well as the metals and minerals necessary to manufacture key
components. Nuclear power generation becomes a clear option
(including in South Africa).
• Natural gas replaces coal in power generation in some countries.
Challenges exist in the availability and cost of materials required
for renewables, further increasing gas demand.
• Petrochemical demand continues to rise with some recycling and
reuse. Technology development is, however, slower and developing
regions still struggle with implementing systems to reduce demand.
• Some financing is available for transition activities but access is
challenged by changing requirements and geopolitical alliances.
• Adaptation requirements and costs are significant, related to more
frequent and severe extreme weather events for both developed and
developing countries.
• The supply chain capacity of key minerals and metals required to
facilitate the energy transition comes under strain and concentrated
ownership of large portions of the mining and refining portions of the
supply chain complicate access to key components.
• Greater investments are required in adaptation efforts, which are
projected to increase over time.
SASOL CLIMATE CHANGE REPORT 2023
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regulatory changes.
– Fluctuations in demand for liquid fuels and chemicals.
chemicals to 2030.
– The executability of the strategy in terms of the
operating model, proposed partnerships, capabilities
and skills availability within the organisation and the
financial framework in the period to 2030.
• Once the evaluation is complete, the robustness level is
tested at executive level and signed off.
QUANTITATIVE ROBUSTNESS TESTING
• For each product and feedstock in each scenario, a future
price assumption view is developed. For example, future
price assumptions for oil, refined products, natural gas,
chemicals, carbon, exchange rates and US ethane.
• These price assumptions are signed off by the Sasol Group
Assumptions Committee.
• Through Group Finance, a detailed financial modelling
exercise is undertaken to test the financial robustness
to 2030. Using outputs such as earnings before interest,
taxes, depreciation and amortisation (EBITDA), cash flow
impacts on the organisation are distilled and shared with
the executive team for decision-making.