ESG – Taking a ‘beyond compliance’ approach. What it means and why it matters

ESG (Environmental, Social, Governance) has evolved from decades of focus on sustainable development and is increasingly becoming a critical business imperative.

ESG is often associated with how a company is measured against certain criteria to achieve a

good ESG rating or secure funding. Similarly, it is frequently used with reference to words

like ‘ compliance ‘,’ reporting’, ‘measurement’ and’ investment’. “The challenge with this is

that it can lead to a ‘good enough’, or ‘tick box’ approach. Corporations should be

implementing ESG to achieve sustainable, profitable growth” says Joshua Low, co-founder of

the ESG Africa Conference, scheduled for 25-26 October 2022, at the Sandton Convention

Centre. “Indeed, the World Economic Forum notes that companies that take ESG seriously,

and are able to embed it within their organisations, achieve 20 percent higher profitability on

average.”

Some companies only focus on the compliance aspects of ESG. What’s lacking is a clear

understanding of the substantive benefits of taking ESG seriously and why organisations

should work hard to embed it into their value systems and culture. “For example, a recent

global survey conducted by Marsh & McLennan showed a strong correlation between a

company’s ESG rating and employee satisfaction ratings. This is one of many studies, showing

that employees are increasingly looking at a company’s ESG credentials when making

decisions about where to work,” says Wendy Poulton, CEO of Strategic Mindsets.

“I recently wrote an article on the importance of gender diversity and inclusion. In it, I

emphasized that having a diverse workforce and taking inclusivity topics seriously leads to

significant benefits, by enabling better problem-solving, creating a more innovative work

culture, and ensuring that organisations are able to attract and keep talent” Poulton adds.

The benefits of taking a ‘beyond compliance’ approach to ESG are clear. Companies which

take a long-term view and who are working hard to embed ESG into their organisation’s DNA

are seeing a range of benefits. ESG is now seen as an essential way for organisations to

remain competitive and sustainable in the long term. It is essential in the management of

uncertainty and how risks, both positive and negative can be addressed.

The social element is critical in Africa and there are an increasing number of companies in

South Africa that have collaborated with local communities to improve their impact on the

environment. Not only does this assist the companies in reducing costs and achieving net

zero ambitions, but it also helps build their social licence to operate by establishing trust with

the local communities and improving their lives and enhancing the goodwill of consumers

and other stakeholders. “With social activism on the rise, people are increasingly holding

companies to account as to how they deal with issues across the ESG spectrum” says Justine

Sweet, Environmental law specialist. “Implementing good governance measures, the

common thread linking the ‘E’, ‘S’ and ‘G’, also ensures broader stakeholder engagement and

better returns.” Sweet adds. “Lastly, companies that don’t take their ESG credentials

seriously will find it increasingly difficult to secure financing from local and global

institutions.”

“We are seeing ESG becoming more of a focus on the continent, as we deal with several

climate-related issues such as the flooding in KZN, the droughts in Kenya, climate change

related migrations across the Sahel region and the plethora of social challenges that were

amplified by COVID. This current reality is forcing businesses to manage ESG related risks.

Businesses that have pro-actively embedded ESG in their culture and way of doing business

will have a competitive advantage, by adding value, driving efficiencies, managing change

better and creating greater positive impact” finishes Marie Parramon-Gurney, CEO of

SKULTCHA, a purpose-driven company.