Climate change

Key features

  • Total carbon footprint of 1,646,520 tonnesRA CO2e.
  • Climate characterised by drought conditions.

Our climate change risk profile remained the same relative to 2012, with the significant risks being regulatory and physical. Regulatory risks are associated with the new reporting requirements for companies listed on the London Stock Exchange and, most importantly, with the imminent implementation in South Africa of a national carbon tax scheme to promote climate change mitigation.

The potential physical effects of climate change, such as droughts or floods due to extreme weather events and/or changes in precipitation patterns, and the long-term risks associated with national water scarcity and energy supply are inseparable from other business risks. As a result, our commitments in terms of climate change are to improve operational energy efficiencies and reduce our water and waste footprints. More information on the initiatives in place to mitigate these risks is contained in the sections Energy efficiency and demand management, Managing our water resources and Waste management respectively.

Platinum group metals (PGMs) continue to offer significant opportunities in the global fight against climate change. The most critical application of PGMs in this regard is the role played by platinum in autocatalysts, which reduce the harmful exhaust emissions from car engines. For more information on this and other environmentally important uses of PGMs, please see the section Our products and their markets.

Carbon tax

The National Climate Change Response Paper provides for a range of economic instruments to be used to drive mitigation and adaptation, one of which is the introduction of a carbon tax. This is due to come into effect on 1 January 2015 at a cost of R48 / tCO2e, increasing by 10% per annum for the first five years. There is no certainty yet on the exact structure of the scheme. It is currently expected that a company's direct carbon tax liability will initially be limited to its Scope 1 emissions, which will be incorporated into company costs as an additional tax liability. The electricity sector will however be covered by this tax as well, and will be likely to pass this onto the consumer in the form of a levy. This is significant as Scope 2 emissions account for our most significant source of GHG release. This levy is currently anticipated at approximately 3.7c / kWh in 2015, increasing by 10% annually up to a levy of 19.3c / kWh.

Given this structure, it is projected that Lonmin could pay approximately R77.6 million in carbon tax in 2015, increasing at 10% per annum until 2020, resulting in estimated additional costs of over R600 million in nominal terms over the period.

We have submitted comments on the draft policy though the Treasury and the Chamber of Mines, and have raised concern that there is no clear allocation yet outlining how this tax will be spent. We also continue to engage with Business Unity South Africa (BUSA), the Chamber of Mines and other stakeholders to seek to ensure that this legislation is passed in a form that promotes environmental responsibility, with appropriate consideration taken for the needs of business and industry.

GRI
EC2
Financial implications and other risks and opportunities for the organisation’s activities due to climate change.
EN26
Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation.

Lonmin's Climate Change Response Strategy was drafted in line with our Risk Management Policy and is fully integrated into our overall environmental management policies.

It is based on the identification and monitoring of the physical, regulatory and reputational risks associated with climate change and the potential opportunities and the adaptation measures that we can embed into our operational and business practices to mitigate those risks.

Cost management presents another business imperative that is directly influenced by aspects of climate change, and we have a dedicated budget and various internal finance mechanisms to promote energy and resource efficiency.

One of the key components of our Climate Change Response Strategy, and an important tool in the planning of carbon tax cost management, is our dynamic carbon optimisation model. This uses Lonmin-specific relationships between production and energy consumption to forecast energy and direct and indirect GHG emissions profiles against the Lonmin Life of Business Plan.

Through our membership of the International Council on Mining and Metals (ICMM) and the South African Chamber of Mines (CoM), we are indirectly involved in advocacy on issues such as the feasibility of renewable energy programmes to supplement the national grid, the design of the proposed carbon tax, a national GHG emissions inventory and proposed government policies on climate change.

GHG emissions classification

According to the GHG Protocol developed by the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI), GHG emissions are classified as either direct or indirect, and from there are divided further into Scope 1, Scope 2 and Scope 3 emissions.

  • Direct, or Scope 1 GHG emissions are emissions from sources that are owned or controlled by the reporting entity.
  • Indirect GHG emissions are emissions that are a consequence of the activities of the reporting entity but that occur at sources owned or controlled by another entity.
    • Scope 2 emissions are indirect emissions attributable to the reporting entity due to its consumption of purchased electricity.
    • Scope 3 emissions are all other indirect emissions associated with activities that support or supply the reporting entity's operations.
Scope 1 GHG emissions by source (%) [graph]

Carbon emissions profile

We calculate our carbon footprint for disclosure in our Annual Report and Accounts and our voluntary participation in the Carbon Disclosure Project. Our Scope 1 and Scope 2 emissions footprint is calculated in accordance with the GHG Protocol: Corporate Accounting and Reporting Standard. We use the methodology outlined in the GHG Protocol: Corporate Value Chain (Scope 3) Accounting and Reporting Standard for the reporting of our Scope 3 emissions.

Our total carbon footprint for 2013 was 1,646,520 tonnesRA (t) CO2e, 4.7% higher than in 2012 (1,571,940 t CO2e). Our dependence on electricity continues to make up the most significant share of our GHG emissions profile. Our GHG intensity has increased from 1.16 kilotonnes (kt) CO2e per PGM ounce in 2012, to 1.23kt CO2e per PGM ounce in 2013, which amounts to a rise of 6.03%.

Total GHG emissions [graph]
GHG emissions breakdown by source and location 2013
Source (t CO2e) Scope 1 Scope 2 Scope 3 Total
Marikana 98,887 1,469,220 3,210 1,568,106
PMR 2,421 18,828 158 21,249
Limpopo 592 52,047 52,639
Group 1,157 1,157
Total 101,900 1,540,095 4,525 1,646,520RA

As Scope 2 emissions make up such a significant proportion of our overall emissions profile, we focus predominately on enhancing our electricity efficiency in order to reduce our GHG emissions. More information on energy consumption and efficiency can be found in the section on Energy efficiency and demand management.

Scope 3 emissions

Scope 3 emissions CO2e per category 2013
GHG Protocol category t CO2e
Purchased goods and services 70
Transportation of waste generated in the operations 684
Business travel 1,157
Employee commuting 2,614

While these Scope 3 emissions currently represent an insignificant portion of our total profile, they represents four of the fifteen categories outlined in the GHG Scope 3 Reporting Protocol, which provides the reporting parameters for our Scope 3 footprint. We are in the process of ascertaining and confirming the Scope 3 boundary in terms of relevance to our operations, taking into account our business objectives against the fifteen categories, and we are on track to report on this in 2014.

GRI
EN16
Total direct and indirect greenhouse gas emissions by weight.
EN17
Other relevant indirect greenhouse gas emissions by weight.
EN18
Initiatives to reduce greenhouse gas emissions and reductions achieved.
EN29
Significant environmental impacts of transporting products and other goods and materials used for the organisation’s operations, and transporting members of the workforce.