Page 573 - COSO Guidance

2. Strategy and objective-setting for ESG-related risks

Table 2.1: The six capitals f

Type Description
Financial capital The traditional yardstick of performance; includes funds obtained through financing or generated by
means of productivity
Manufactured capital Encompasses physical infrastructure and related technology, such as equipment and tools
Human capital The knowledge, skills, competencies and other attributes embodied in individuals that are relevant to
economic activity
g
Social (and relationship) Networks together with shared norms, values and understandings that facilitate cooperation within or
capital among groups
h
Natural capital The stock of renewable and non-renewable natural resources (e.g., plants, animals, air, water, soils,
minerals) that combine to yield a flow of benefits to people i
Intellectual capital The skills and know-how of an organization’s personnel, in addition to their commitment and motivation –
which affect their ability to fulfill their roles

The diagram below depicts how Sasol Limited, an integrated energy and chemical company based in the
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Republic of South Africa, uses the six capitals to create value.
USING THE SIX CAPITALS TO CREATE VALUE
We create value for our stakeholders by developing and commercialising technologies and building and We have a combination of assets, skills and relationships that place us in a strong position to deliver value-
operating facilities to convert mostly low-cost hydrocarbon feedstock into a range of high-value product based growth. When making decisions on how to manage our business, we take these, as well as other
streams. These include chemicals used in industrial and consumer products, liquid fuels used to move resources and relationships that are critical to our ability to create value sustainably, into account.
people and goods, and electricity to power our facilities and contribute to South Africa’s and Mozambique’s We refer to these as the six capitals. Inputs of each are needed for the effective production and delivery
Sasol's value creation model
power-generating capacity.
of Sasol goods and services, thereby generating value for all our stakeholders. In so doing, we contribute
towards advancing several of the UN Sustainable Development Goals (SDGs).
IN MANAGING OUR SIX
CAPITALS, THE BOARD AND
MANAGEMENT CONTINUES TO:
KEY
INPUTS PROCESSES OUTPUTS
EVALUATE risk tolerance
and risk appetite measures
ASSESS impact on our
material matters
We produce bulk FINANCIAL IMPACT
EVALUATE impact on our fuel and chemical
Prioritised investment in
HUMAN CAPITAL strategic objectives COAL-TO-LIQUIDS (CTL� commodities as well as research and development
To grow and steer our business and operate our a vast spectrum of high R1 bn
facilities safely and efficiently, we require high- ALLOCATE capital to further
performing, innovative and diverse people with the unlock value GAS-TO-LIQUIDS (GTL� value-add differentiated
right skills and experience. We focus on being an petrochemical products Total capital expenditure Earnings
inclusive organisation, building and retaining critical R53,4 bn R8,7 bn
skills and developing our leadership capabilities.
SOCIAL AND RELATIONSHIP CAPITAL CHEMICAL PROCESSES
To create an enabling environment for operations and SUSTAINABILITY IMPACT
investment, we integrate the needs of our stakeholders
into our business and we deliver on our commitments. Total greenhouse Total water
We actively engage stakeholders to ensure we progress ELECTRICITY gas emissions consumption RCR of
on our value-based growth strategy and have a multi- 67 412 134,4
stakeholder approach to solve difficult challenges. 0,27
OUTCOMES kilotons thousand cubic regrettably
NATURAL CAPITAL GAS-TO-POWER (GTP� FOR OUR (C0 2 equivalent) meters 4 fatalities
We require natural gas, shale gas, coal and crude oil as STAKEHOLDERS
well as air, water, land and energy to convert hydrocarbon
reserves into value-adding product streams. Total Extended home
energy use ownership programme B-BBEE status
FINANCIAL CAPITAL 413 470 benefiting Level

We are disciplined in the way in which we allocate our 140
financial capital. We use cash generated by our operations thousand mining employees 6
gigajoules
and investments, as well as debt and equity financing, to since January 2016
run our business and fund growth.
MANUFACTURED CAPITAL DEVELOP new value- VALUE DISTRIBUTED
By investing in plant and equipment, we are able to adding opportunities
convert hydrocarbon resources into high-value product Skills and socio-
streams and operate reliably. These investments also Wages and economic development
help manage our environmental footprint and assist GROW the business sustainably benefits paid spend Dividends paid

us to comply with regulatory requirements. R30 bn R2 bn R8 bn
INVEST smartly to retain current
INTELLECTUAL CAPITAL operations
Our proprietary or licensed technologies, Preferential Issued
software, licences, procedures and procurement of 3 million
protocols support Sasol’s competitive EVALUATE business performance over
advantage. Through various initiatives continuously against strategic R12,7 bn Sasol ordinary BEE shares
to selected members of
that include operational excellence, black public at no cost as
Continuous Improvement and targets
digitalisation, we enhance our part of Sasol Khanyisa
robust foundation.
UNDERPINNED BY:
Managing the capital Environmental and regulatory
Governance Risk management High-performing people Zero harm
trade-offs compliance
8 Sasol Integrated Report 2018 Sasol Integrated Report 2018 9
The business context
Changes to the business context can influence an entity’s vision, strategy and business objectives and its ability
to create and preserve value. The COSO ERM Framework defines business context as the “trends, events,
relationships and other factors that influence, clarify or change the company.” Principle 6 of the Framework
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describes the importance of understanding the potential affects of the business context on risk profile,
including external factors – such as political, economic, social, technological, legal and environmental forces
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– and internal resources such as capital, people, processes and technology. Integrating ESG issues into an
organization’s understanding of the business context sharpens its ability to identify and respond to risks.
. . . . . . . . . . . . . . . .
f The definitions used in this table are adapted from the <IR> Framework except where otherwise noted.
g This is the OECD definition of human capital, which is used in the draft “Social & Human Capital Protocol” due for publication in 2019. This definition of human capital is
similar to that used by the <IR> Framework, which is defined as “people’s competencies, capabilities and experience, and their motivations to innovate.”
h This is the OECD definition of social capital which is used in the draft “Social & Human Capital Protocol” due for publication in 2019. This definition is similar to that used by
the <IR> Framework, which is defined as “the institutions and the relationships within and between communities, groups of stakeholders and other networks, and the
ability to share information to enhance individual and collective well-being.”
i This definition was obtained from the Natural Capital Coalition's “Natural Capital Protocol.” This definition is similar to that used by the <IR> Framework, which is
defined as “all renewable and nonrenewable environmental resources and processes that provide goods or services that support the past, current or future prosperity
of an organization.”
26 Enterprise Risk Management | Applying enterprise risk management to environmental, social and governance-related risks • October 2018