One of the world’s largest coal miners, Glencore, announced on Wednesday that it plans to cap its coal production capacity to current levels and is developing long-term targets in line with the Paris Climate Agreement.
Anglo-Swiss mining company Glencore bills itself as “one of the world’s largest globally diversified natural resource companies” and is ranked 14 on the Fortune Global 500 with revenues of $219.8 billion in 2018. The largest coal miner in Australia — itself, one of the largest coal mining nations in the world — Glencore’s impact on global emissions levels is extreme.
Which makes the company’s announcement — revealed at the same time as it published its 2018 earnings — that it intends to cap coal production at current levels and develop long-term targets in line with the Paris Climate Agreement such a welcome surprise.
As announced on Wednesday night, the mining giant explained that it “has a key role to play in enabling transition to a low carbon economy. We do this through our well-positioned portfolio that includes copper, cobalt, nickel, vanadium, and zinc – commodities that underpin energy and mobility transformation,” the company added. “We believe this transition is a key part of the global response to the increasing risks posed by climate change.”
The company’s press release hit all the right talking points — acknowledging the “climate change science as set out by the United Nations Intergovernmental Panel on Climate Change” and stating that “global response to climate change should pursue twin objectives: both limiting temperatures in line with the goals of Articles 2.1(a) and 4.1 of the Paris Agreement (’the Paris Goals’) and supporting the United Nations Sustainable Development Goals, including universal access to affordable energy.”
The specifics of Glencore’s plans are simple: The company will prioritize its capital investment to grow production of its commodities business that it deems as necessary to the energy and mobility transition and will limit its coal production capacity “broadly” to current production levels.
Further, and in direct response to what it described as “engagement with investor signatories of the Climate Action 100+ initiative,” Glencore will implement five steps that it believes will further its “commitment to the transition to a low-carbon economy.” These steps include reporting publicly on the extent to which the company’s material capital expenditure and investments were aligned with the goals of the Paris Agreement; developing new, longer-term targets based on policy and technological developments that support the goals of the Paris Agreement — goals it will make public in its Annual Report in 2020 and which it will report on annually; and taking “an active and constructive role in public policy development” and potentially participating in relevant trade associations.
“Climate change brings both risk and opportunity for investors,” said Anne Simpson, Climate Action 100+ global Steering Committee chair, and CalPERS Director of Board Governance and Strategy. “Keeping global warming to well below two degrees demands bold and urgent action from the world’s largest greenhouse gas emitters. Glencore’s new commitments to its investors are a vital step forward in the path to align strategy with the goals of Climate Action100+.”
“Glencore’s commitment to work within the Paris Agreement is a significant step forward for the companyexplained Stephanie Pfeifer, a member of the global Climate Action 100+ Steering Committee and CEO, Institutional Investors Group on Climate Change. “As engagement moves to the next stage we look forward to working with Glencore and the sector as a whole on reducing emissions across the value chain.”
This is all in addition to existing steps the company has already taken, including its 2017 announcement of its first Scope 1 and 2 greenhouse gas emissions reduction target to reduce intensity by 5% by 2020 compared to a 2016 baseline — a target the company is currently on track to achieve. The new longer-term reduction targets will thus expand on this existing target. Glencore already reports annually on the progress in meeting its climate change objectives, including continued disclosure of its Scope 3 emissions, and in addition to reporting its Scope 1 and 2 targets the company will review any changes to the Nationally Determined Contributions (NDCs) in line with the Paris Agreement mechanism and “other relevant policy, economic and technology developments to assess societal progress in the energy transition and to update our scenario-based portfolio assessment.”
Glencore’s announcement has obviously been warmly welcomed by investors and climate campaigners alike, though the general consensus is that more needs to be done for the company to truly back up its new tough talk.
“To truly align with the Paris Agreement, Glencore must go much further in reducing its coal operations,” the Dutch branches of Greenpeace, Friends of the Earth and ActionAid International said in a joint statement. “Halting expansion is not enough, we have to move towards rapid fossil fuel phase out to avert catastrophic climate change.”
“As one of the world’s largest coal companies, Glencore’s announcement today that it will not grow its coal business should be welcomed,” said ClientEarth Head of Climate Alice Garton. “However, to properly ensure its business is aligned with the Paris Agreement, Glencore should wind up its coal operations in a just transition and return any remaining capital to shareholders.
“Importantly, Glencore must halt its international lobbying against climate action – either by pressuring governments to make pro-coal decisions or through its membership of climate obstructionist trade associations. Only by leaving such groups that have consistently lobbied against climate ambition can Glencore fully deliver on its new climate commitments.”
“Investors have made it clear that they expect Glencore to align its business model with the Paris goals, and stop engaging in indirect and direct lobbying activities that undermine action to address climate change,” added Jeanne Martin, senior campaigns officer at ShareAction. “This forceful engagement has started to bear fruit.
“Today’s announcement is a good step forward for Glencore – the black sheep of the energy world – which for far too long refused to come out in support of the Paris Agreement. However, it’s actions not words that matter. Glencore’s South East Asian coal frenzy will be a true test of the company’s commitment to the Paris goals. The IPCC has made it clear that coal has no role to play in a low-carbon future, a finding seemingly at odds with Glencore’s recent coal acquisitions and own production forecasts for thermal coal. ShareAction will watch closely to make sure Glencore stays faithful to today’s commitments.”