How firms can report on sustainability

An aerial view of the Special Economic Zone in Kigali. Investments on the continent can accomplish social and economic progress. (File)

As the ancient African proverb states, “If you want to go fast, go alone. If you want to go far, go together.”  If we applied the same wisdom of our ancestors, I would like to believe that we would be able to address a myriad of issues that we are facing today.

Investments on the continent can accomplish social and economic progress. However, when the development is one sided, the effects are ruinous. This can be avoided by impactful and sustained development in an ideal world whereby we hope governments can hold true regulations and ethics to ensure that communities and companies have a relationship that is symbiotically healthy and beneficial.

Over time there has evolved the need by stakeholders to examine a company’s impact above and beyond profitability. On the backdrop of such development, organizations have recently developed a sharp and candid focus on sustainability reporting and it is rapidly becoming a common business practice globally.

 Global Reporting Initiative, a leader in sustainability reporting defines the practise (sustainability reporting) as a report by a company or organization about the economic, environmental and social impacts and demonstrates the link between its strategy and its commitment to a sustainable global economy.

 This enables the understanding of how a company performed socially, the impact it had on the environment and how its governance stands out is all mirrored in their sustainability report. It is similar to a financial report in many ways than just a marketing tool.

 A large number of organisations have evolved from the philosophy of philanthropy to an era where companies strive to empower the whole ecosystem. Many organizations having adopted an online presence, whereby in 2017 we saw a new trend in sustainability where 67 per cent of companies used videos in their SR reports and 69 per cent integrated social sharing and 87 per cent used testimonials. This only goes to show that SR is something that is going to be in the mainstream in a few years to come.

When it first came up it was viewed as a peripheral ‘green’ issue. This too has so far changed with evolving sectors and companies adapting to a range of disruptive global forces such as carbon emission, climate change, scarcity of resources and human rights. Companies and especially the multinationals have evolved and are more socially aware of their operational environments. There is also an awakening to the fact that they need to demonstrate how they are partnering and empowering stakeholders they come  to do business with. With regard to regulation, governments and stock exchanges are increasingly putting measures in place to ensure that there is some level of sustainability reporting and integrated reporting by companies. However in Africa, sustainability reporting is still very minimal. According to a Word Bank study, out of twenty eight (28) African Exchanges only two (2) have issued an ESG reporting guidance for listed companies . Pegged to the fact that it is time consuming, expensive and companies not actually having structures in place to give back to the community.

A majority of companies are approaching sustainability in a keen and focused manner. Organizations are determined to provide better products, healthy business and sustainable future. To achieve this, you find the main drivers being employee engagements, innovation, climate and environmental responsibility, integrity and moral behavior.

In the matter of investments, investors are increasingly giving a keen look into organizations impact beyond profitability. This goes to show sustainability reporting is quickly becoming a key decision maker for investors, more of what is referred to as qualitative analysis which is subjective judgment based on unquantifiable information, such as management expertise, sector operations, strength of research and development departments, strategic planning and labour relations.

 We have seen an increase of referred information in Africa whereby investors are requesting to meet companies to inquire more on a company’s operations. In turn, companies are increasingly setting up investor relations personnel to manage such cases.

On the basis of this context, SustainAlytics which is a global firm offering investors research and data regarding companies and geared toward promoting sustainability, shows that in the next five years Africa is going to be a niche market.

The Sustainable Development Goals (SDG’s) have become a key benchmark to company’s sustainable goals.

41 per cent of businesses are expected to embed SDGs into their strategy and business practices within the next five years, and 71 per cent of businesses say they are already planning on how they will incorporate the UN SDGs. Companies are finding it important to align with the key goals in the industry they operate in and communities would be glad to sustain their environment, there just needs to be a big mind shift and a knowhow on how to go about achieving SDGs in an equitable manner.

Africa has a task to provide solutions to its unique challenges. We need to empower ourselves to create innovative solutions to address climate change, hunger, water scarcity, unemployment and a variance of other challenges that we face.

Having a shared growth advantage means that every other entity in the ecosystem is growing at a healthy pace and in so doing we will be able to eliminate most if not all of the above mentioned challenges together.

 

Joslyne Muthoni is an Associate Consultant, focusing on investor relations, sustainability and social media listening. Muthoni has worked on recent assignments across the agriculture, power, mining and consumer goods sectors, as well as conducting extensive research and analysis for public sector clients

 

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