As requirements for environmental, social and governance (ESG) reporting become increasingly more stringent, companies in South Africa are urged to better understand the importance of ESG commitments, as well as the technologies that support them.

Speaking during a webinar on ESG, hosted by Creamer Media on September 17, Pele Green Energy senior environmental and social specialist Sandhisha Jay Narain said ESG was becoming a decisive factor for investors in South Africa, noting that embedding strong ESG systems and practices into corporate ethos could help establish investor confidence.

She also argued that expertise was needed throughout organisations to deliver on ESG systems.

She explained that investors were not only interested in low-risk projects, but also wanted to better understand the materiality and transformative impact of these projects.

“If organisations can tap into both sides of this equation, you can definitely secure . . . deeper and cheaper funding in terms of capital,” she said.

Moderated by Genesis Analytics shared value and impact practice principal Mark Robertson, panellists discussed issues such as how ESG integration could provide a strategic advantage for businesses in today’s market, as well as the role ESG could play in advancing renewable-energy projects.

Panellists also included SRK Consulting principal environmental scientist Fiona Sutton, Standard Bank manager of business ecosystems and sustainability for business and commercial banking Sheena Ramsamy, Rand Refinery chief technical and sustainability officer Terance Nkosi, Growthpoint Properties corporate advisory head Werner van Antwerpen and National Cleaner Production Centre of South Africa (NCPC-SA) business support manager Julie Wells.

Wells said the environmental element of ESG required companies to monitor and report on their performance in terms of energy, water and carbon footprints, as well as resource and waste management, noting that the mandate to report had accelerated the uptake of resource efficient and cleaner production.

She noted that this was owing to three reasons.

Firstly, once operational teams begin to monitor their energy, water, waste or carbon metrics, they have more information to guide their production or operational decisions, often resulting in improvements that lead to measurable savings.

Hence, she explained that evidence of savings in the low or no cost interventions could motivate companies to invest in further improvements to not only improve ESG ratings, but also to realise resource, and ultimately, cost, savings.

Secondly, ESG targets are usually communicated to staff and included in performance contracting.

Wells noted that communication and incentivisation drove behaviour change throughout the organisation, often resulting in changes in practices and even policies such as procurement or facilities maintenance. 

Finally, while this may not be a direct cause and effect relationship, ESG reporting requirements and performance targets make executive management more receptive to supporting operational improvements required for resource savings.

Wells explained that capital expenditure constraints could often be an obstacle to adopting cleaner technologies, but continuous improvement of ESG performance could help create a competitive advantage, leading to executive-level buy-in.

She also noted that a major barrier to the implementation of resource efficient and cleaner production was lack of management buy-in.

“Increased monitoring and reporting of those environmental metrics leads to information, and that usually plays a notable and a very positive role in accelerating the adoption of resource efficiency and cleaner production in industrial and commercial sectors,” she said.

Panellists also discussed the role of technology in assisting companies to achieve ESG targets, with Wells describing technology as a game changer for most industries in terms of improving environmental performance.

With this in mind, she noted that technologies, such as sub-metering, can significantly improve reporting quality and ESG reports, as well as help to identify leaks in real-time.

“Technology is a massive contributor,” she said.

In this vein, Sutton discussed the importance of responsible water stewardship in ESG, describing water stewardship as a “powerful connector” across all three pillars of ESG, noting that it could help companies future-proof their operation, meet investor expectations and contribute meaningfully to global sustainability goals.

She highlighted frameworks and tools for water stewardship, such as the Alliance for Water Stewardship Standard and the World Wide Fund for Nature Water Risk Filter.

She also highlighted the importance of stakeholder engagement and collaboration in water management.

“Stakeholders need to recognise that water is a shared resource whose management is a shared responsibility, and this will manage the risk more effectively,” said Sutton.

Narain warned that adopting a tick-box approach to ESG without fully understanding its implications could lead to superficial reporting and monitoring.

“The key to successful ESG is to really look at what trends are coming out of your monitoring, for example, and whether it be waste monitoring or your health and safety statistics, what those trends are and how we actually adapt our policies and procedures and our processes to curb any sort of negative impact that might come to fruition,” she said, arguing that ESG should not be thought of with a silo mindset, but should rather transverse various different business units in the organisation.

“It's not just one division that is now responsible for everything, but rather a collective thought process.”