South32 Faces Rising Investor Pressure Over Missing Scope 3 Target

South32 lacks a measurable Scope 3 emissions reduction target despite recording 65.6 million tonnes of carbon dioxide equivalent in Scope 3 emissions in FY2023, which represent 76% of its total emissions footprint. The accelerating steel and aluminium decarbonisation technology transition is eliminating the rationale for the absence of an interim Scope 3 goal, according to IEEFA analysis.

South32's Scope 3 emissions totalled 65.6 million tonnes of CO2 equivalent in FY2023, down 3% from FY2022 and 40% lower than FY2020 following asset divestments. Alumina and aluminium account for 40% of the company's Scope 3 emissions, while downstream steelmaking — linked to its metallurgical coal operations — contributes 28%. The company has a net zero goal for 2050 encompassing Scope 3 emissions but no intermediate Scope 3 target. More than 10% of shareholders voted against the company's climate action plan at its 2022 annual general meeting, with the primary objections being the absence of a short-term target and the exclusion of Scope 3 from the medium-term 2035 goal.

Investor expectations on Scope 3 are rising rapidly across the mining sector. In 2023, companies including TotalEnergies, Woodside, Glencore, ExxonMobil, and Chevron faced investor pressure on their Scope 3 performance. Commonwealth Bank of Australia now requires existing clients deriving more than 15% of revenue from metallurgical coal sales to publish transition plans covering Scope 1, 2, and 3 emissions from 2025 — the first time the bank has specified Scope 3 coverage. Direct reduced iron installations, which eliminate coal from steelmaking, are reaching commercial scale: H2 Green Steel completed a €1.5 billion equity raising in September 2023 to finance the world's first industrial-scale green-hydrogen-based DRI plant.

South32 CEO Graham Kerr has acknowledged that European carmakers are willing to pay a premium for green aluminium from the company's hydro- and renewables-powered smelters in Mozambique and Brazil, and that alternative steelmaking technologies will challenge metallurgical coal within two decades. The company has stated it will not develop new coal mines and will manage down existing metallurgical coal operations as mines deplete. However, reports in August 2023 of potential coal asset sales — rather than managed decline — have heightened investor concern. Analysts note that selling coal mines to operators who may extend mine lives does nothing to reduce global emissions and conflicts with the responsible stewardship increasingly expected by institutional investors.

Key figure — South32's Scope 3 emissions totalled 65.6 million tonnes of CO2 equivalent in FY2023, representing 76% of its total emissions.