Africa Business Communities

[Column] Vukani Mngxati: CEOs must prioritize sustainability and risk mitigation

Along with all caring South Africans, a few months back we witnessed the aftermath of the flooding in KwaZulu-Natal with a combination of horror, sadness, and powerlessness, as lives were lost and communities devastated. My empathy was more pronounced. I come from the province – a place where I have family and friends and that is deep-rooted in my soul.

I was appalled at reports suggesting the possibility of malfeasance in relief fund distribution and along with other members of the business community welcome strong words by President Ramaphosa that corruption in this respect will not be tolerated.

The debate over why this tragedy occurred will continue for months to come. But there is no doubt it happened against the backdrop of climate change. The most vulnerable members of our communities now starkly feel its effects. The time for action is now. Companies need to prioritise sustainable practices or risk complicity in the catastrophic climate events that will inevitably come.

In most African organisations primary KPIs continue to be sales, profitability, and growth. Sustainability is not considered, and CEOs are not held accountable. Acknowledging your contribution to the local and global carbon footprint is essential to getting the ball rolling – if you cannot fully understand the damage you are doing, how are you going to work towards a solution?
Businesses that continue to view climate change as a corporate responsibility issue instead of holistically in relation to their practices are doomed to face the consequences of pushing sustainability to the bottom of the agenda. Accenture is doing well in this regard, using a rounded approach which focuses on shareholders and stakeholders. This means that we do our research on companies that prioritise sustainable practices and we are more likely to collaborate with them. We are also aware that funding for green initiatives in organisations is backed by the likes of the IFC and the World Bank's Green Climate Fund. These funds or green bonds are AAA rated and are far cheaper than the normal debt facilities SA companies have access to, and this has a direct impact on the profitability of an organisation. Finally, we also approach sustainability initiatives as a cost reduction imperative, as organisations that reduce their water consumption, reduce their dependence on grid power and effectively manage waste are more profitable than those that do not.
We understand that prioritising sustainability will have huge benefits for business in the long run. These include increased customer growth and retention, a greater share of investors, access to cheaper AAA-rated financing, which in turn will reduce the cost of funding for CAPEX and expansion projects, and a good news story for the marketing department. These benefits come with the fact that consumers and investors (20% of whom are individuals who are extra-sensitive to where they invest their money) are more aware than ever of a business's sustainability credits.
We also understand that over time, as the climate emergency continues to escalate and the onus is on corporates to mitigate its effects, legislation will converge and all emissions including those of your suppliers will become part of an organisation's footprint as those emissions would not exist, but for the service, suppliers give to an organisation. Approaching third-party emissions in an analogous way to the early BEE laws that required an organisation to reflect the demographics of South Africa and for it to enforce these laws with suppliers has a knock-on effect. As you enforce these mandates, suppliers will be forced to adopt more sustainable practices to stay in business.
There are a couple of steps that companies can take to integrate sustainability into their overarching business model. Once companies include sustainability as a top KPI that investors and consumers use to judge the performance of an organisation, organisations can make some tangible progress. Internally, the role of the Chief Sustainability Officer must be elevated to an Exco position. This is so that the CSO can build a set of sustainability initiatives into the organisation's improvement roadmap.
Every organisation needs to be able to quantify its local and international footprint and have initiatives between now and 2030 to minimise that carbon footprint. Finally, companies that take these steps must effectively market their Sustainability credentials as the key differentiator against their competitors.

Vukani Mngxati is the CEO for Accenture in Africa


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