Are companies serious about ESG or is it just paying lip services?
If it is not purposeful, then it’s just lip service, CFOs told Finance Indaba attendees.
As the largest bank on the continent, Standard Bank has a responsibility towards ESG and directing resources geared towards ESG initiatives. At the Finance Indaba Online, Arno Daehnke, Group FD, Standard Bank told attendees that more often than not, organisations who are motivated by sustainability will most likely succeed compared to those that are not.
“I think me and Raj [Nana] echo the same sentiments about purpose: companies need to be driven by purpose,” he said. “Our purpose is ‘Africa is our home and we drive her growth.’” Arno said. “Social sustainability and environmental issues are actually our purpose. If we don’t have those matters at the forefront, we will fail to deliver on our purpose,” he added.
Arno highlighted that companies that are driven by purpose tend to attract much better talent and ultimately attract a broader pool of investors. “I see investors really bringing up ESG-related matters on the roadshows that I go on, and how they are thinking about ESG and holding companies accountable,” he explained.
Standard Bank has value drivers, mainly client-centricity, employee engagement, risk and conduct, operational excellence and social and economic responsibilities. “As the largest bank on African soil, our total balance sheet in terms of assets is R2.7 trillion, and how you direct this amount has a tremendous impact on sustainability-related issues in Africa, specifically,” Arno said.
Earlier this year, Standard Bank launched its climate policy outlining the bank’s environmental impact targets of net zero emissions by 2050. By 2030, Standard Bank hopes that all its new buildings will be green buildings.
“Africa is disproportionately impacted by climate change and the recent floods in KZN are one example of how ignoring our impact on the environment will result in similar types of events occuring. While these floods might have not been a direct result of climate change, they are cause for concern nonetheless.”
Arno said that investors overseas are very vocal about the fact that companies need to make ESG a core criterion in order to attract investment.
According to Devrani Moonsamy, head of finance, the Competition Tribunal of South Africa, as more and more companies start to adopt ESG strategies, which are ultimately to the benefit of the country from an environmental perspective, they also need to consider ESG strategies geared towards addressing the socio-economic issues of the country.
“ESG is not just about driving profits, but to see what impact you’re having on society. ESG is also a risk management tool that involves or focuses on non-financial objectives even more,” she said.
She highlighted that the private sector needs to be more purposeful about its ESG strategy, as the public sector has far fewer resources, and this will be very beneficial for the country in the long run.
Raj Nana, CFO and executive director, Attacq Group, agreed that ESG must be purposeful and not just a talk shop.
“The way we have approached ESG at Attacq is by making it a real thing and impactful. Organisations should understand their purpose and mission and try to incorporate it into their ESG at that level as fundamentals. Once you’ve done that, the decision-making and the monitoring follows from there seamlessly,” he said. “This way, ESG doesn’t become a side hustle or an ad hoc project and you’ll see it prosper.”
“From an Attacq perspective, we are all about creating safe and sustainable spaces for our communities in all the space under our management. “We use sustainable strategies, methods of construction and different types of technology embedded in our buildings, when we develop our buildings,” he explained.
Raj highlighted that communities are also involved in the construction of those buildings, which touches on other social elements of ESG as well. Furthermore, if this was not embedded in Attacq’s purpose it would be difficult for them to align themselves in their day-to-today responsibilities.
“In the real estate sector, we have completed our first net-zero building. However, the real estate sector still has some more work to do. While saving costs, we need to consider the environment and look at solar and clean energy. In fact, we are developing a solar farm to produce alternative energy, or clean energy through, one of our partnerships.
“Other initiatives include setting ourselves a reduction strategy/goal to reduce our carbon footprint by 2030 and beyond. Using technology and understanding the baseline will help or inform how we can reduce our impact, especially where reduction is concerned,” he added.
“Our architects are exploring alternative materials for environmental impact consideration, but we still have a long way to go locally, especially in the construction of green buildings.”
According to Rebecca Pole, FD, NEXTEC (EOH), while companies are concerned about their reporting, they are also made up of people – employees and stakeholders – who are all increasingly focused and interested in a company’s purpose over and above the financial goals companies set for themselves.
There’s been an increase in leaving society in a better place from the side of organisations as well. “We are trying to create sustainable solutions for our generation and future generations, as an organisation,” Rebecca said.
Rebecca believes that environmental impact assessments should be informed or aided by digitisation. “Digitisation allows professionals to get a full appreciation of what it will take to keep the environment safe, and we, as finance professionals, need to be at the forefront of that.
“We have to partner with the public sector to address social issues such as youth unemployment: we have heavily invested in education opportunities for the youth in STEM fields. Our NEXTEC business helps transport skills-based young people to receive training, giving them the necessary experience for gainful employment. We have also partnered with the automotive sector in the Eastern Cape for gainful employment,” she added.
In terms of ESG and digitisation, Rebecca pointed out that the Covid-19 pandemic has emphasised the importance of organisational culture and a deliberate drive towards digital transformation.
At the end of the session, all of the panellists agreed that ESG is not hype, but work that still needs to be done in this area, and every sector has an important role to play. As they put it, ESG is not a one-man show, but a team effort.