Organisations can help to build trust and deliver sustained outcomes by implementing effective environmental, social and governance (ESG) strategies and stakeholders tend to place more trust in organisations that demonstrate a sustained interest in communities, the environment and good governance, says assurance, advisory and tax services multinational PwC Africa ESG Africa leader Jayne Mammatt.
"Increasingly, stakeholders of all kinds hold organisations accountable for delivering sustainable value. They expect organisations to do more than simply ‘tick a box’," she adds.
The Covid-19 pandemic, climate change, economic disruption and governance challenges are not unique to Africa and, likewise, social imperatives such as unemployment and inequality are relevant to organisations of all kinds.
Investors, lenders, rating agencies and other interested stakeholders expect more transparency on financial and non-financial metrics to better understand a company’s performance and risks. Organisations also need to show how they create value for shareholders and society alike through insightful, balanced and trusted performance and disclosure.
"In Africa and beyond, we believe organisations must integrate ESG considerations into their corporate and investment initiatives and activities, as well as internalise ESG holistically, to build trust and ensure long-term sustainability, agility and competitiveness. Stakeholders increasingly expect organisations to communicate and deliver convincing and measurable sustainable ESG strategies," says Mammatt.
The key drivers influencing the relevance and importance of ESG strategies differ by industry, but typically include disruption and vulnerability in socioeconomic circumstances, regulatory requirements, changing market supply and demand priorities, environmental anomalies, transformation of investor perspectives and technological and academic progress, she highlights.
PwC's research on the prioritisation of ESG indicates that almost three-quarters of business leaders in organisations are embarking on their ESG journeys. A few other companies, however, have already started reorienting their businesses toward a value-creation ecosystem that includes environmental sustainability, employee engagement and broader societal impact to financial imperatives as measures of success.
"Fully integrating ESG into the overall corporate strategy and operating model, as well as adapting to a changing environment, begins with the tone at the top. A company’s ability to control and report on its operations in alignment with its ESG strategy may also require technology-enabled data transparency, new systems and processes, and potentially training and skills development," says Mammatt.
An organisation’s competitiveness and value-add in future will depend on understanding the potential effects of ESG drivers on the organisation now and in the future; continuously adjusting the business strategy and operating model to the ever-changing environment combined with the ability to innovate; detecting risks and harnessing opportunities along the entire value chain, as well as investing in technology; and responding appropriately and in good time to outside pressure.
"Every organisation is unique, as is the scope of change required to implement an ESG strategy. However, there are two interconnected needs - the need to build trust and the need to deliver sustained outcomes, that we believe explain the imperative for ESG strategies at every organisation, including ours."
"PwC helps clients to manage stakeholder advocacy for net-zero policies and commitments, as well as increased pressure to incorporate ESG metrics into executive pay packages. We are also deeply committed to implementing our own ESG strategy as PwC. ESG is one of six areas that PwC Africa is focusing on to bring The New Equation to life within our organisation and in our work with clients," she says.
PwC pledged to achieve net zero greenhouse gas emissions globally by 2030, decarbonise its supply chain, embed ESG factors in the work it does with clients, and support efforts to develop ESG reporting frameworks and standards. The global PwC network has recently received validation for its science-based targets and reaffirmed its commitment to achieve net-zero greenhouse-gas emissions by 2030, Mammatt notes.