PwC has urged business leaders to urgently drive effective Environmental, Social and Governance (ESG) research as this is critical to performance as it can have a direct impact on people’s living standards. African organisations appear to be lagging behind global trends in taking action on climate change.
According to PwC CEO survey, only six out of ten CEOs in Africa are concerned about physical and transition risks associated with climate change. Some 77% of African CEOs say their company has not made a carbon neutral commitment, this is worse when compared to the global average of 71%.
Carbon neutrality, or net-zero carbon dioxide (CO2) emissions, is achieved when organisation’s Co2 emissions are balanced globally by Co2 removal, typically over one year. Furthermore, 80% of African CEOs say their organisations have not yet made a net-zero commitment compared to 73% globally.
Mr Edward Kerich, PwC ESG Lead for East Africa, says African companies should integrate ESG into their corporate and investment initiatives to build trust and ensure long-term sustainability and competitiveness.
The risks associated with climate change, especially in African countries, have many socio-economic implications such as unemployment, food insecurity, increasing health risks, and migration. This is according to research conducted by the University of Oxford’s Sustainable Finance Programme, which found that an increase in company-level ESG performance can result in a positive effect on a country’s living standards – both in developed and emerging markets.
Organisations must take steps now to future-proof their businesses by implementing and accounting for their ESG matters. African companies have made some progress and according to the survey, these companies are more likely to have non-financial ESG related outcomes included in their long-term corporate strategy than their global counterparts.
However, this is not yet prominent in CEOs’ annual bonuses or long-term incentive plans. For example, only 10% of African CEOs have GHG linked to their remuneration versus 37% globally. In turn, some 45% of FTSE 100 companies now have an ESG measure in executive pay. Including ESG metrics in executive pay packages is a tangible way to close the say-do gap.
Some of the cited key challenges in embracing ESG in Africa organisations include human resource capacity, lack of a sustainability champion at the top of the corporate ladder, local regulation might not require reporting of sustainability metrics and responding to ESG issues is seen as a cost, not an investment.
The global PwC network has committed to achieving net-zero GHG emissions globally by 2030, decarbonising our supply chain, embedding ESG factors into our client engagements, and supporting efforts to develop ESG reporting frameworks and standards.