China Petroleum & Chemical Corporation, also known as Sinopec, is one of the major oil and gas companies in China. The company is a majority-owned subsidiary of the state-owned Sinopec Group. Its operations include the exploration, production, storage and transportation of petroleum and natural gas.
|Engagement Objective - Environmental:
Provide a comprehensive low carbon transition roadmap to meet TCFD recommendations
The company has faced a number of environmental and social allegations; we are engaging with the company on these. In 2H 2017 and during 2018, we focused on the disclosure of the company’s environmental performance− a crucial step in the development of a strategy for the transition to a low-carbon environment.
We first raised concerns about the company’s lack of information on and explanation of its climate change strategy and risk mitigation measures with senior executives in 2014. In the following years, we urged the company to set internal targets for the disclosure of carbon emissions information and regularly checked on progress. In 2015, we supported the UN Global Compact seminar hosted by the company in Beijing to discuss its group-wide initiative on greenhouse gas emissions reduction and disclosure. A year later, at the invitation of the company, we contributed to a discussion on the formulation of an internal carbon price across the group. We encouraged its executives to attend the first climate change training workshop held by the CDP in Beijing. We spoke at the workshop to provide a shareholder view of the importance of climate change and disclosure of emissions information.
In 1H 2018, we ran a workshop for the company on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and discussed how to analyse its portfolio resilience to a number of relevant low-carbon scenarios.
Changes at the company
There is board oversight on climate governance by the social responsibility management committee, composed of two independent directors and board chair. The committee is responsible for monitoring and overseeing progress against goals and targets set for addressing climate-related issues.
It has set up a number of internal task forces to assess its climate change-related risks and to identify opportunities that can be incorporated into its longer-term business strategy. In addition, the company made changes to the criteria and processes for its investments in new projects, such as the inclusion of a stress test of the financial impact of low-carbon scenarios. This has led to the rejection of some projects.
On capturing climate opportunities, the company announced its Green Enterprise Action Plan in April 2018 with specific targets in 2023, 2035 and 2050. The plan covers green product development, as well as green production, service, technology and culture.
On methane reduction, the company introduced a methane-reduction programme and set a methane-specific reduction target, although the target is not disclosed. The oilfield subsidiaries implemented recovery measures for natural gas during production and testing processes, casing gas and oil tank gas when necessary and possible. A total of 220 million cubic metres of methane was recovered in 2017. According to the company, this is equal to a reduction of 3.3 million cubic metres of carbon dioxide emission.
The company attended CDP training sessions as recommended by us and reviewed global and local best practices. This was followed by its first disclosure to the CDP in 2017. In the second quarter of 2018, the company disclosed its absolute level of carbon emissions by business divisions for the first time.
We continue to encourage the company to improve the consistency of the disclosure of its greenhouse gas emissions; to further refine its climate change risks and opportunities assessment framework, including the use of climate-related scenario analysis; and to adopt science-based targets as per the TCFD recommendations.