The complex socio-economic challenges in South Africa cannot be solved by government, civil society, or international development organisations alone, but there is an increasing call on corporates to take responsibility and to collaborate with the different role players to address social and environmental issues.
Businesses play a key role in the communities they serve by providing employment and labour markets, services, commodity markets, and they have an impact on the environment around them and on the resources they use.
Responsible investing is becoming a real concern among many corporate companies, and especially in CSI boardrooms where discussions around the sustainability of investments, as well as their ethical impact are driving forces during the decision-making process.
Corporate companies have to consider more than just the financial benefits of their investments: they also need to consider their impact on social matters as well on the environment. Simply put, they have to find new ways of doing business.
To determine the environmental and social impact of investments, many companies follow ESG (environmental, social and corporate governance) indicators, a broad term used in capital markets and by investors to assess the behaviour of companies and to estimate their future financial performance.
ESG indicators highlight the non-financial risks that companies take when investing, and address the main areas of concern when it comes to sustainability and ethical practices, for example, evaluating the company’s carbon footprint and ensuring that accountability systems are in place. Concerns are increasing significantly over the way that companies are governed, leading to a call on corporates to be more transparent and accountable.
Owing to the rising interest in the sustainability agenda worldwide, and in order to redress the socio-economic challenges as a result of apartheid, South African corporates have some of the most advanced standards, policies and guidelines on ESG issues. In 2015, the Socially Responsible Investment (SRI) index (now the FTSE/JSE Responsible Investment index) was introduced by the JSE. This played a role in encouraging companies to consider more responsible investment practices – with those companies realising that these practices will not only benefit others, but will also hold long-term benefits for themselves.
A company’s ESG initiatives have the potential to impact its financial performance positively over the long term. Businesses that adopt ESG activities are better prepared to deal with the many societal shifts that are unfolding, as they already have systems in place to deal with current and emerging social and environmental issues.
Of course, the CSI strategies of most corporate companies often spearhead their ESG initiatives, and often form the vessel that enhances the reputation and brand of the company, while also assisting in developing effective and more responsible business strategies. CSI is no longer viewed as mainly grant-making or philanthropy, but it is playing an ever more important role as a key component of business operations, sustainability, and development.
How can companies make the shift to responsible business? As leaders of industry, they need to speak out about issues that affect society, such as gender and racial equality, as well as issues that affect the environment. CSI strategies should be aligned with the business as well as with international goals.
Companies also need to implement governance structures that will be more inclusive, transparent, and put accountability at the heart of their decisions, to represent the views of a wide range of stakeholders better.
Collaboration with government, civil society and other organisations should be the main priority, with an emphasis on collective action to address the many social and environmental issues that our country faces. With social challenges having increased in the last two years, owing to Covid-19 and to political unrest, companies have no choice but to work together to ensure a more sustainable and socially stable future that will also help to secure their own survival in years to come.