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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 4. CARBON DISCLOSURE VEHICLES IN
SOUTH AFRICA cont...(2)
Figure 1: Analysis of CDP Questionnaire Responses for 2008 and 2009

13. Figure 2: CDP (SA) Response rates 2007 to 2009
13

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. 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. 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. 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. Figure 5: Company participation and responses to JSE SRI
(2004-2009)

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. 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. 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. 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. 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. 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. 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. 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. 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.
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28. Thank you !
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