Sanlam Barometer charts Africa’s course to sustainable business

The 2024 Sanlam ESG Barometer, which includes companies listed on both the Nairobi Securities Exchange (NSE) and JSE, notes encouraging progress in Africa’s sustainability journey.

More than 80% of companies surveyed have an explicit ESG (environmental, social and governance) strategy as part of their organisational value drivers, rather than merely as a compliance factor.

Atop the strategic focus on sustainability is “purpose-driven impact”, influenced by the need to create tangible positive community outcomes. This signals a maturation in how African companies view ESG — not as a box-ticking exercise but as a core part of their business strategy and value creation.

However, this progress also highlights areas where improvement is needed.

While African businesses are doing remarkable work in ESG —particularly on the social side, we are not effectively communicating our efforts on the global stage. This is especially crucial as we face international challenges such as the looming Carbon Border Adjustment Mechanism (CBAM) legislation.

African leaders and businesses must proactively engage in global sustainability discussions to ensure our continent’s interests are well-represented.

Evolving regulatory landscape

This year’s ESG Barometer research also sheds light on the evolving regulatory landscape and its effects on ESG practices. The International Sustainability Standards Board’s (ISSB) inaugural standards are a significant development, with 60% of surveyed SA and Kenyan companies planning to adopt these standards and 24% planning to do so within the next 12 months. This move towards standardisation will enhance comparability and transparency in ESG reporting.

However, challenges remain. Respondents identified the availability, accuracy, and consistency of ESG-related data and measurements as the most significant barrier to implementing sustainability strategies. This underscores the need for continued investment in robust data collection and analysis capabilities.

Navigating global ESG complexities

Despite the rise of anti-ESG sentiment in some regions, particularly in the US, the survey results indicate that this has not shaken the commitment of participating companies to sustainable investment. This resilience is commendable and suggests a deep-rooted belief in the value of ESG principles.

Interestingly, the effects of these global debates varies between SA and Kenyan companies. While both markets demonstrate a commitment to sustainable investing, Kenyan companies express more concern about the long-term effects of anti-ESG sentiments. For example, 40% of Kenyan companies reported investors citing ESG factors as a reason for divesting, compared to only 8% of South African companies.

This disparity suggests that Kenyan investors may be more sensitive to global ESG trends, or it could reflect differences in investor bases between the two markets. Despite these concerns, most companies in both countries remain committed to their ESG strategies, recognising that long-term value creation goes hand in hand with sustainable business practices.

Charting the path forward

The Sanlam ESG Barometer 2024 report underscores the critical importance of sustainability and ESG practices in driving long-term value for African businesses. Though the findings highlight significant progress in various sectors, they also reveal areas requiring urgent attention and improvement.

African businesses must forge stronger partnerships and collaborate more effectively to harness the potential of sustainable practices. By focusing on ESG outcomes, companies can enhance their resilience and competitiveness and contribute meaningfully to the continent's socioeconomic and environmental wellbeing by adopting a unified approach to sustainability.

Sanlam is committed to expanding the ESG Barometer research to encompass more African countries and companies, thereby elevating the voice of African business on the global stage.

This expansion aims to provide a broader, more inclusive understanding of the unique challenges and opportunities within the African context, fostering a more robust and cohesive approach to sustainability. Our collective effort towards a shared sustainability agenda will be instrumental in achieving a more sustainable and prosperous future for Africa.

• Socikwa is the group executive for market development & sustainability at Sanlam.