Carbon disclosure in South Africa: Corporate
green wash of genuine transition to low carbon
economy?
Alfred Bimha (Msc)
Le...
Objectives of the Presentation
This presentation addresses the following key questions:
1. Why must we be talking about ca...
4 pointers to take home
1.

The concept of carbon disclosure borrows fundamentals
from disclosure in accounting and financ...
Overview of Presentation
1.
2.
3.
4.
5.
6.
7.
8.

Introduction
The Disclosure Context
Research Methodological Orientation
...
1. INTRODUCTION
I.

Concern : Are carbon disclosure vehicles
utilised by corporate South Africa effective in
transition to...
Introduction cont...(2)
What is Carbon Disclosure?
Defined by the Carbon Disclosure Project 2009 Global 500 Report (McGill...
Introduction cont...(3)
• Why Carbon Disclosure?

 Heightened euphoria about carbon emissions
abating globally.
 Request...
2.DISCLOSURE CONTEXT
1.

Disclosure is one of the commonly accepted principles of corporate
governance and there is consta...
3. RESEARCH METHODOLOGICAL ORIENTATION
• Desktop research with data and information
being obtained from current projects a...
4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA
There are three major self-regulated carbon
disclosure vehicles that are:
1....
4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA
cont...(1)
Carbon Disclosure Project (CDP)
a. Underlying objective of the CD...
4. CARBON DISCLOSURE VEHICLES IN
SOUTH AFRICA cont...(2)

Figure 1: Analysis of CDP Questionnaire Responses for 2008 and 2...
Figure 2: CDP (SA) Response rates 2007 to 2009
13
4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA
cont...(3)

• JSE SRI Index
I.

The Johannesburg Stock Exchange (JSE) came u...
4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA
cont...(4)
• In order to assess listed companies against the JSE SRI Index,
...
Figure 3: SRI index criteria 2003-2005
90
80

78 78
70

70
points

60

2003

50

2004

40
22 25 25

30
20

12

16 16

18 2...
Figure 4: Environmental Sustainability Criteria for
2003-2005
9
2005

16
22

Environmental sustainability Low impact compa...
Figure 5: Company participation and responses to JSE SRI
(2004-2009)
Low impact

Medium impact

High impact

Table 1:SRI Index and outstanding performers for 2005
and 2006
Status of companies...
New JSE-SRI Index Requirements – Starting 2010
• Training & Development
• Employee Relations
• Health & Safety
• Equal Opp...
JSE SRI Index minimum requirements & Best
Performer in the CC category
Companies must demonstrate evidence in relation to ...
Disclosure

Management /
strategy

Policy /
governance

New JSE-SRI Index CC Indicators*
Senior responsibility for climate...
4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA
cont...(4)

Energy Efficiency Accord (EEA)

1. Was finalised on 1st August 2...
4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA
cont...(4)
Energy Efficiency Accord (EEA)
6. As of December 2008, 43 industr...
6.COMMAND AND CONTROL REGIMES

• Draft Taxation Laws Amendment Bill
– The sale of certified emission reductions (also
know...
7.CORPORATE GREEN WASH OR GENUINE CALL?
• Stricter regulatory framework taking shape globally and in SA
making corporates ...
8. CONCLUSION
• The continuing focus of policymakers, businesses, NGOs and
consumers on CC has turned the heat up on corpo...
Thank you !
28
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Carbon assets in a constrained global climate policy regime: International perspectives and implications for Africa

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  • The criteria are incremental in nature. The intention is to lead companies to consider what risks they face from the anticipated effects of climate change, and how they are managing and reporting on their efforts to reduce their carbon emissions. The chosen criteria are intended to encourage companies to take concrete action starting with a basic infrastructure of responsibility and commitment. Company assessments are made on the basis of a selection of introductory indicators, which will be expanded over time, covering the following areas: policy and governance, management and strategy, disclosure and performance and innovation. The focus is on companies' management response to the challenges of climate change in particular addressing the management of operational emissions, development of new products and performance disclosure.
  • * ALL COMPANIES MUST MEET SENIOR RESPONSIBILITY AND CLIMATE CHANGE COMMITMENT
  • Carbon assets in a constrained global climate policy regime: International perspectives and implications for Africa

    1. 1. Carbon disclosure in South Africa: Corporate green wash of genuine transition to low carbon economy? Alfred Bimha (Msc) Lecturer: Dept. Finance, Banking & Risk Management, UNISA & Godwell Nhamo (PhD) Programme Manager: Exxaro Chair in Business & CC, Unisa Presentation for the 3rd ICAF, Skiathos Palace Hotel, Skiathos Islands, Greece (25-27 August 2010)
    2. 2. Objectives of the Presentation This presentation addresses the following key questions: 1. Why must we be talking about carbon disclosure in South Africa? 2. What are the mechanics and vehicles being used to implement carbon disclosure in South Africa? 3. How many corporates are participating in Carbon Disclosure Project (CDP) in South Africa? 4. To what extent is carbon disclosure successful in SA? 2
    3. 3. 4 pointers to take home 1. The concept of carbon disclosure borrows fundamentals from disclosure in accounting and finance and has a bearing on most South African corporate future profits. 2. Carbon disclosure is driven by self-regulation although command and control vehicles are emerging 3. The South African government is working towards a fine tuned carbon disclosure regulatory and fiscal regime that would make tracking and reporting of emissions mandatory. 4. Carbon disclosure in South Africa is genuinely addressing CC leading to a low South African carbon economy. 3
    4. 4. Overview of Presentation 1. 2. 3. 4. 5. 6. 7. 8. Introduction The Disclosure Context Research Methodological Orientation Carbon Disclosure and Related Vehicles in South Africa Corporate Engagements with the Vehicles Command and Control Carbon Disclosure Regimes Corporate Green Wash or Genuine Call? Conclusion
    5. 5. 1. INTRODUCTION I. Concern : Are carbon disclosure vehicles utilised by corporate South Africa effective in transition to a low carbon economy or are they just a face cover or mere tools of compliance? II. Purpose : To find out if South African Corporates are genuinely reducing carbon emissions or just following reporting procedures 5
    6. 6. Introduction cont...(2) What is Carbon Disclosure? Defined by the Carbon Disclosure Project 2009 Global 500 Report (McGill, Gledhill 2009) as: The process of companies measuring and reporting their carbon emissions; integrating the long term value and cost of climate change into their assessments of the financial health and future prospects of their business 6
    7. 7. Introduction cont...(3) • Why Carbon Disclosure?  Heightened euphoria about carbon emissions abating globally.  Request for accountability from companies about how they are abating carbon emissions in their activities  Issues of creative accounting surrounding carbon disclosure 7
    8. 8. 2.DISCLOSURE CONTEXT 1. Disclosure is one of the commonly accepted principles of corporate governance and there is constant concern about quantity, quality and frequency of financial and managerial disclosure, 2. The degree and extent to which the board of Directors (BOD) exercise their trustee responsibilities (largely an ethical commitment), and the commitment to run a transparent organization 3. Carbon disclosure is part of a broader range of environmental, social and corporate governance (ESG) issues that greater numbers of investors have been seeking in recent years 4. The assurance of quality disclosure and transparency is dependant on the accounting and auditing standards and the financial reporting standards (FRS) in practice. Is the current FRS able to offer reputable carbon disclosure given the continuous hoodwinking in financial reporting and auditing scandals? This remains to be seen. 8
    9. 9. 3. RESEARCH METHODOLOGICAL ORIENTATION • Desktop research with data and information being obtained from current projects and, news articles and surveys that have been undertaken in South Africa since 2000. • Two approaches of obtaining data – Government activities on Climate Change – South African companies’ participation in voluntary carbon emissions reduction programs 9
    10. 10. 4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA There are three major self-regulated carbon disclosure vehicles that are: 1. Carbon Disclosure Project (CDP) 2. Johannesburg Stock Exchange Socially Responsible Investment (JSE SRI) Index 3. Energy Efficiency Accord (EEA). 10
    11. 11. 4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA cont...(1) Carbon Disclosure Project (CDP) a. Underlying objective of the CDP (CDP Global 500:2009) is to review and assess the action and disclosure of companies and sectors against what is seen as a best practice response to the challenges of climate change b. The JSE 100 sample for CDP 2009 was identified on the basis of market capitalization as at 30 December 2008. 11
    12. 12. 4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA cont...(2) Figure 1: Analysis of CDP Questionnaire Responses for 2008 and 2009
    13. 13. Figure 2: CDP (SA) Response rates 2007 to 2009 13
    14. 14. 4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA cont...(3) • JSE SRI Index I. The Johannesburg Stock Exchange (JSE) came up with a Socially Responsible Investment (SRI) Index as a benchmark index facilitating investment in companies with good records of CSR. II. The SRI Index (which draws a lot from the GRI SRG) is constituted from companies that form part of the FTSE/JSE All Share Index and that meet the selection criteria set out in the SRI Index Philosophy and Criteria (Johannesburg Stock Exchange, 2004) 14
    15. 15. 4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA cont...(4) • In order to assess listed companies against the JSE SRI Index, the JSE circulated in October 2003 a 56-paged launch questionnaire probing for a number of major SRI issues. • From the questionnaire, the following pillars of the triple bottom line reporting were identified: – Environmental sustainability – Social sustainability – Economic sustainability 15
    16. 16. Figure 3: SRI index criteria 2003-2005 90 80 78 78 70 70 points 60 2003 50 2004 40 22 25 25 30 20 12 16 16 18 21 21 2005 10 0 Overal score (including environmental sustainability) Corporate governance Social sustainability Economic sustainability 16
    17. 17. Figure 4: Environmental Sustainability Criteria for 2003-2005 9 2005 16 22 Environmental sustainability Low impact companies 9 2004 Environmental sustainability Medium impact companies 16 22 Environmental sustainability - Hig impact companies 8 2003 14 20 0 5 10 15 Points 20 25
    18. 18. Figure 5: Company participation and responses to JSE SRI (2004-2009)
    19. 19. Low impact Medium impact High impact Table 1:SRI Index and outstanding performers for 2005 and 2006 Status of companies on SRI Index 2005 No. Outperforming AngloAmerican Platinum Corp Ltd 22 AngloAmerican plc BHP Billiton plc Gold Fields Ltd Sasol Ltd 12 Edgars Consolidated Stores Ltd Telkom SA Woolworths Holdings Ltd 14 African Bank Investments Ltd Alexander Fordes Ltd Nedcor Ltd Status of companies on SRI Index 2006 No. Outperforming companies Anglo American plc AngloAmerican Platinum Corp Ltd 30 Impala Platinum Holdings Limited Oceana Group Limited Sasol Limited The Tongaat-Hulett Group Limited 13 15 Edgars Consolidated Stores Limited Medi-Clinic Corporation Limited Telkom SA Ltd Woolworths Holdings Limited Liberty Group Limited Nedbank Group Limited Remgro Limited
    20. 20. New JSE-SRI Index Requirements – Starting 2010 • Training & Development • Employee Relations • Health & Safety • Equal Opportunities • BEE etc • Addressing all key issues in sustainability Environment Society Climate Change Governance & Related Sustainability Concerns (New 2010 Criterion) • Managing & Reporting on efforts to reduce carbon emissions and deal with the anticipated effects of climate change Source: Authors, based on JSE 2010: 5 •Board Practice and Ethics •Indirect Impacts •Business Value & Risk Management •Broader Economic Issues 20
    21. 21. JSE SRI Index minimum requirements & Best Performer in the CC category Companies must demonstrate evidence in relation to the following two indicators: • Senior responsibility for climate change related issues • CC commitment Recognition of Best Performers • Providing evidence in relation to all relevant indicators in relation to climate change. 21
    22. 22. Disclosure Management / strategy Policy / governance New JSE-SRI Index CC Indicators* Senior responsibility for climate change related issues Climate change commitment Product related climate change commitment (where relevant) Any targets/goals linked to GHG emissions reductions (long/short term) Emissions disclosure (Absolute or normalised) Scope of data Methodology applied Source: JSE 201: 14 22
    23. 23. 4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA cont...(4) Energy Efficiency Accord (EEA) 1. Was finalised on 1st August 2006 (DME 2006) following the conclusion of the EEA Strategy of the Republic of South Africa in 2005 2. EE Strategy spelt out a target of a national final energy demand reduction of 12% by 2015 3. Agreement between Industry and Government that the EE Strategy should be reviewed regularly in three-year cycles. 4. Industry signatories agree that the National Business Initiative (NBI) would act as the focal point in the implementation of the Accord. 5. Business Unity SA (BUSA) is given mandated to deal with formal legislative and policy negotiations
    24. 24. 4. CARBON DISCLOSURE VEHICLES IN SOUTH AFRICA cont...(4) Energy Efficiency Accord (EEA) 6. As of December 2008, 43 industries had signed the Accord since its inception in 2006 including Eskom. 7. Measures will be set out in a Policy White Paper on Climate Change to be released by government in 2010 (DEAT 2010), with the translation of this policy into a legislative, regulatory and fiscal package by 2012.
    25. 25. 6.COMMAND AND CONTROL REGIMES • Draft Taxation Laws Amendment Bill – The sale of certified emission reductions (also known as carbon emission reductions credits) will be exempt from income tax – businesses will obtain notional deductions for income tax purposes for energy efficiency savings from certified baselines based on energy efficiency certificates issued by the National Energy Efficiency Agency 25
    26. 26. 7.CORPORATE GREEN WASH OR GENUINE CALL? • Stricter regulatory framework taking shape globally and in SA making corporates accountable • The CDP has witnessed significant growth in SA and has taken a developmental approach • JSE SRI has also taken a developmental approach to disclosure • The EEA has also witnessed growth in signatories and energy has been saved in SA • Companies have moved towards green investments in energy 26
    27. 27. 8. CONCLUSION • The continuing focus of policymakers, businesses, NGOs and consumers on CC has turned the heat up on corporate reporting and disclosure around climate change and carbon. • A number of leading institutional investors standing alongside environmental NGOs to call for mandatory reporting of CC risks. • Definite increase in companies coming to terms with their base carbon footprints in SA • It will be proper that companies acquire a bit more time, next 5-10 yrs, understanding their actual inventories and then setting targets based on their economic growth paths. 27
    28. 28. Thank you ! 28

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