Sasol Limited Climate Change Report 2021 - Book - Page 45
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CLIMATE CHANGE IN BUSINESS PROCESSES
Risk management
Our risk management process
Our Enterprise Risk Management process fully integrates the Group top risk review
process with business site risks. Our Board provides governance oversight on the
identified top risks, which includes climate change.
Climate change is both a strategic issue and a top risk. Through our annual materiality
assessment, it is also classified as a material matter for the Group. Strategy and
material risk identification are intimately linked, with a rigorous approach followed to
identify these risks. This approach is depicted on IR page 24 - 26.
Sasol's climate change risks are informed by key drivers, such as policy and compliance, market and customer sentiment, physical impacts, investor and stakeholder
pressure and access to capital. Our response to managing these risks aim to reduce our risk exposure and maximise opportunities created. This is reflected in Future
Sasol's strategy, our targets and roadmaps as we progress to Net Zero.
An iterative approach is adopted to address an evolving climate change landscape. This process is informed by robustness testing of our strategy and downscaled
modelling using the IPCC RCP 4,5 and 8,5.
We see opportunity in the transition to a low-carbon economy and are progressing our climate change response as a top priority.
Climate change risks are assessed as part of long term business viability. They relate to
sustainable execution of our strategy, opportunity management and ensuring a balanced
approach between growth, investment and delivering shareholder value. Our risk analysis
also includes the recommendations prescribed by the TCFD.
Sasol's climate change risks focus on:
1.An inability to develop and implement an appropriate climate change mitigation
response;
2.Downstream societal pressure impacting market access and product
competitiveness; and
3. An inability to ensure physical long term resilience of business operations.
Our risk management process is anchored in the model Plan, Do, Review and Improve.
Decision-making is enhanced by our People, Planet and Profit considerations and in this
way we enable proactive identification of risks and management thereof.
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PLAN
Identify and understand the risk event
Climate-related risks relevant to our business (including
transitional1 and physical acute and chronic risk) and specific to
our operational sites are identified. Risk events are analysed and
assessed based on their severity and prioritised; the external and
internal operating context is also considered.
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IMPROVE
Analyse and improve
Maturity level is assessed, as well as identification of gaps and
opportunities for improvement. Action plans are developed and
learnings are shared.
Sasol's risk
management
process is iterative
and applied in a
dynamic operating
context
DO
Manage and monitor
Mapping of existing business processes, procedures and
standards as key responses to prioritised risks is undertaken.
The appropriateness and efficacy of the key responses are
regularly reviewed.
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REVIEW
Governance and assurance
Climate change risks are tracked, reviewed and assured at GEC
and Board level ( IR refer to page 24 - 26).
Climate change top risks and key responses
Since our first Climate Change Report in 2019, Sasol has made significant progress in addressing our transitional and physical risks of climate change. Identified drivers remain focus areas to manage and mitigate this risk.
Key transitional risk drivers
Unmitigated potential business impact
Key responses
• Higher cost of capital and inability to access capital
• Higher operating costs (carbon tax)
• Compliance risks
• Loss of revenue
• Diminishing market competitiveness and share
• Carbon border tax adjustments
• Diminishing stakeholder confidence, including investors
and customers
• Loss of skills and an inability to retain talent
• Reputational harm
• Asset write-downs
• On a path to Net Zero and 30% lower scope 1 and 2 emissions by 2030 off a 2017 baseline, supported by short, medium and long term
milestones
• Future Sasol's strategy and a diversified product mix
• Establishing an FT sustainable solutions business to maximise opportunities in a carbon-constrained world
• Robust scenario analysis for a carbon constrained world
• Enhanced disclosure
• Implementation of our three-pillar emission-reduction framework
• Optimised synergies between climate change and environmental compliance roadmaps
• Roadmaps to 2030 and 2050, with the 2030 time period having a high degree of confidence and 2050 offering optionality to address an
uncertain future
• Research and development, including demonstration projects to drive innovation on climate change technologies by dedicated teams
• Proof points and partnerships to unlock key climate change mitigation levers and growth drivers
• Proactive stakeholder engagement
• Policy advocacy and tracking of the climate change landscape
• Production interruptions
• Lost production due to forced shutdowns or equipment
damage
• Disruption of work activities (mainly construction and
maintenance)
• Fire, explosion and release incidents or equipment damage
due to direct lightning strike
• Proactive adaptation responses based on downscaled modelling
• Business continuity plans
• Project designs that account for operating in extreme temperatures
• Engineering Design Standards catering for future projected weather extremes
• Regional weather forecasts and warnings
• Existing facility-specific emergency and evacuation protocols
Transitional risks
• Ability to develop and implement an appropriate
climate change mitigation response
• Increasing societal pressures
• Access to low-carbon technologies
Physical risks
• Tropical storms (hurricanes and cyclones)
• High rainfall
• Severe lightning
• Heatwaves
• Tornadoes
• High winds
1. Arise as a result of global and governmental shifts towards a low-carbon future.
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Sasol Climate Change Report 2021