Sustainability, Corporate Social Responsibility (CSR) and ESG (environmental, social, and governance) are often used interchangeably in many boardroom conversations and although related means very different things in the context of what is often referred to as the triple bottom line: Profit, People and Planet.
In our webinar ”ESG for Boards: From Strategy to Disclosure” co-hosted with Azeus Convene on the 17th of May, keynote speaker Sarah Keyes, CEO of ESG Global Advisors provided clarification on the many acronyms that exist in the sustainability space and noted that while CSR is not new and focuses on an organisation’s values and relationship with stakeholders, the relatively new ESG has a financially material impact on the organisation’s value. She noted that the important distinction is that “CSR is focused on values while ESG is focused on value.”
The impact of ESG on Investing
Investors are driving ESG conversations as providers of capital and panellists discussed the importance of ESG investing and Dr Ashraf Gamal El Din noted that in the MENA region, investors as well as regulators are putting pressure on companies to be responsible in their corporate behaviour to ensure capital flows into the region. NGX CEO, Ms Tinuade Awe added that investors are interested in people, the planet and profit and while profit is important, it should not be at the expense of the environment and society. Investors are also looking at impact and as ESG and sustainability factors are long-term, they will also be looking at sustainable and responsible sourcing in supply chain management.
In response to the most important aspects of ESG that Boards should pay attention to, Dr Gamal El Din noted that there are many factors, but the organisation’s focus would for example depend on the jurisdiction the company was operating in, the industry, how advanced the organisation is in its development, etc. Tinuade added that in Nigeria, guidelines and policies have been issued by the regulators and she suggested that organisations should start by looking at the national policies that would be relevant to the organisation to provide guidance.
ESG Reporting/Disclosures (Regulations and Frameworks)
The panellists also debated the issue of mandatory versus voluntary sustainability reporting and Dr Alejandra Medina from the OECD noted that the establishment of the ISSB had merged the different frameworks that were available and that the building block approach they have adopted will guide companies on their approach to sustainability reporting. Tinuade added that there was a significant knowledge gap and the development of global standards may build the necessary capacity and encourage regulators to move from voluntary to mandatory reporting. She noted that ESG is a continuum and regulators who adopt the mandatory approach should beware of reporting becoming a tick-box exercise.
ESG and Digitisation
The panel also discussed the role of technology and in particular how it facilitates taking ownership of ESG. Shih Hor Lau noted in his presentation that “Sustainability is about change and change comes about by taking ownership”. He added the 4 imperatives of ESG digitisation which is to automate, validate, mitigate and navigate. Ashraf noted that while technology does provide a competitive edge, organisations should also be aware of the risks that it presents. Tinuade added that technology will simplify reporting in that the data would be available regardless of the reporting framework and would also make collaboration between organisations easier. She also cautioned against the cost of technology and data security risks. Shih Hor noted that there are challenges and risks but that it was a journey that required all stakeholders to work together to provide solutions that will make a difference.
Live Q & A