By Steve Chemaly (Director) and Angela Paschalides (Associate) at Norton Rose Fulbright South Africa

The social aspect of environmental, social and governance (ESG) is an essential component of a sustainable business practice providing sustainability, and perhaps it is even more important than the environmental aspect. This article focuses on the ‘S’ in ESG, and its importance in South Africa.

The adoption and implementation of ESG practices has become increasingly more important for companies seeking to attract investors, and for the sustainability of South African businesses. ESG has become one of the markers to assess the impact, viability and integrity of a company’s operations. 

Driven by international initiatives to tackle climate change and promote sustainable development, the environmental aspect of ESG has progressively become the main focus in the market, with international trends placing pressure on South African companies to meet high standards of sustainability. As a result, South African companies are required to become more focussed on meeting, in most cases, unachievably high levels of environmental sustainability. Companies may be losing sight of their social sustainability responsibilities, which arguably deserve as much, if not more, attention in the context of the current South African situation.

Extreme levels of poverty and unemployment are critical reasons why the social aspect of ESG should be the focus in South Africa and requires immediate attention. 

The mining industry is targeted as causing some of the most dramatic impacts on the natural environment. Governments and industry experts worldwide are pushing the industry to take a hard look at how it can reduce its carbon footprint in line with environmental initiatives. But what about jobs? Surely there needs to be an equal push for the industry to implement social initiatives from a social sustainability perspective.

The mining industry is one of the largest employers in the country, and has played a crucial role in job creation in South Africa for over a century. With unemployment levels on the rise, the industry must continue to address the challenge of job creation by investing in skills development and training. Companies must be encouraged to continue to work with government and educational institutions to provide training and education programmes that will equip South Africans with needed skills. These programmes should focus on addressing the shortage of skilled workers in the industrial sector and improving the quality of jobs available.

Industry in South Africa has significant potential for job creation and, with increased commitment to skills development and innovation, can be a significant contributor to job creation and economic development in South Africa. 

By adopting an ESG framework and focusing on the social aspect of sustainability, which is just as essential a component of a sustainable business practice as the environmental aspect, all major South African companies can not only build trust with stakeholders and reduce risk, but also contribute to a more just and equitable society.