Sustainability strategies have ascended quickly in the last five years and the Covid-19 pandemic has served as a catalyst of awakening interest and adoption of these strategies as reasonable approaches to remain resilient during these uncertain times. Going by the number of companies that are reaching out to me for a diagnostic if not for strategy development – it is clear that sustainability is changing the way of doing business across the continent.
This week, I am reflecting on the four keys trends that are leading companies towards sustainability and what boards and senior management will need to consider as they design their sustainability strategies.
First, investors and other owners of money such as commercial banks are changing the finance narrative to include sustainability elements. More institutional investors are managing their portfolio through at least one type of sustainable investment strategies. Strategies such negative/exclusionary screening, ESG integration and sustainability-themed investing are the top three most common strategies deployed by institutional investors which private companies need to be aware of and align themselves on if they are to attract funding.
I expect these strategies are going to gain more momentum and are expected to continue to ascend as investors come forward to support companies to understand how they can best strengthen their ESG-related strategies and goals and link them to the core business models. This calls for consideration of sustainability strategies to enable businesses to be favored by the above strategies. This will not only lead to financing but also to cheaper financing for companies.
Secondly, in order to strengthen corporate governance and stewardship, companies are required by various parties such as regulators, shareholders and industry associations to consider sustainability reporting measures. This coercion is mainly aimed at enhancing corporate governance and transparency within organizations. More companies for instance are being required to report under the Global Reporting Initiative (GRI) as well as capital market authorities and central banks requiring companies to disclose more information in regard to their sustainability journeys. GRI is a component that organizations need to ensure that their senior officers are certified in. Organizations like KCIC Consulting Ltd have been accredited to provide GRI certification in Africa. The results of GRI certification include more companies embracing sustainability to show their engagements when it comes to sustainability matters.
A point in case for this is the financial sector which is undergoing a fundamental reshaping where I expect CBK and CMA to come up with new reporting requirements to better understand the governance and management of financial institutions and listed companies. Sustainability Accounting Standards Board framework, Global Reporting Initative and the recommendations from the Task Force on Climate-related Disclosures and with localization of the same will be key to determining the regulations to be put in place.
Thirdly, employees are exerting pressure on their managements to be considerate on the environment for their own wellbeing/safety and health, and in so doing they ensure resources are conserved for long term sustainability. In the recent past majority of employees are showing willingness to come up with personal initiatives tailored towards the betterment of the environment.
On the other hand, major customers are also becoming more vigilant on environmental and social matters where the majority are requiring firms to reduce on their emissions, produce biodegradable products and make use of renewable sources of materials as part of their sustainability journey. More and more customers are expecting companies to behave more sustainably for them to continue buying from them.
Finally, big buyers are insisting that their suppliers will need to consider sustainability including decarbonization as part of the efforts to streamline their sustainability. Procurement strategies are mobilizing the adoption of sustainability and hence making SMEs and large suppliers of such big buyers to consider the sustainability agenda. A case in point is KCB Group and Safaricom in Kenya who have been encouraging their suppliers to implement sustainability if they are to remain as the preferred suppliers of goods and services to them.
The future remains uncertain for business in light of the Covid-19 recovery process, the climate crisis and other global challenges facing human kind. With the adoption of sustainability mechanisms in their operations, companies will ensure their longevity and resilience in uncertain times. The challenge for the future lies in identifying the material matters for consideration for action as well as collaboration with others to scale up change.
In the coming future, a true leading business will not only be a leader in the business world but also in the society. True sustainability is will be achieved through the combination of earning and sustainability. Without any of these two components, there is no sustainability.
This article was first published on Business Daily.