Regional Summary: Africa 

Introduction: The need for a just and fair climate transition 

Large parts of Africa are extremely vulnerable to the impacts of climate change. All 54 African nations have signed the Paris Agreement, with the focus of climate action on adaptation rather than mitigation. 

However, issues of poverty, equality and economic development are equally important, Enase Okonedo, Vice-Chancellor of Pan-Atlantic University in Lagos, told delegates. While some countries have few natural resources, many African economies are founded on fossil fuels and the extractive industries. Core infrastructure is under-developed. Meanwhile, stamping out corruption is an ongoing challenge, particularly for nations such as Nigeria. 

The emphasis, therefore, is on climate action that stimulates a just and fair transition, stressed Mumbi Maria Wachira, a lecturer in accounting at Strathmore University Business School in Nairobi. This ambition is set out in Agenda 2063, the African Union’s blueprint for inclusive and sustainable growth ¹. Agenda 2063 requires a holistic approach to development, including consideration of the hidden impacts and costs. For example, shifting to renewables would require the relocation of energy generation facilities resulting in large-scale job losses in areas already affected by poverty and inequality; or requiring mass relocation of workers and agreement on how relocation efforts would be funded. 

Climate is relatively low on the agenda 

Consequently, for businesses, the impact of climate change feels both immediate and very real, according to Sherwat Elwan Ibrahim, Associate Professor of Operations Management at The American University in Cairo; climate is not just a notional regulatory risk. 

Despite this, climate action has yet to be propelled to the top of the boardroom agenda within most African countries. However, there is growing pressure, particularly from the investor community, for organisations to address and report their climate impacts. It can be argued that change at the boardroom level for Africa would be an ‘immaterial’ approach to fixing the problem as few businesses are publicly traded or have formal boards similar to those in advanced economies. Yet, we need to find a way to reach directors and leaders in the private sector in Africa, including those from SMEs, by developing convincing mechanisms which include access to finance, and enable these business leaders to get on board with climate action. 

There is limited understanding of the strategic benefits of climate action, according to Maurice Radebe and Lwazi Ngubevana of the University of Witwatersrand in Johannesburg. Many companies regard sustainability as a cost rather than opportunity for competitive differentiation, Okonedo agreed. Meanwhile, few African companies have a board-level sustainability committee overseeing company policy in this area, according to Elwan Ibrahim. Responsibility for climate issues tends to sit under the risk team. 

Pressure for corporate climate action is growing 

However, speakers agreed that there is a growing push for business to act on climate issues, primarily from the finance sector. Banks want to see the social and environmental impact of their investment. They are also driving the need for public reporting on climate issues. 

Small, entrepreneurial organisations, which represent around 80% of companies in Africa, are the first to embrace climate and sustainability. Wachira noted that these organisations are actively seeking investment to support growth and, consequently for them, the influence of the finance sector is critical. However, the commercial success of these smaller organisations is demonstrating that climate action can be a profitable differentiator. 

Wachira went on to say that the Central Bank of Kenya published guidance in 2021 on climate reportingⁱⁱ. This created a sense of urgency among the country’s business community around the need for climate action, but also revealed significant gaps in corporate knowledge of reporting requirements. Many reports were criticised by the bank for being very poor quality. 

Wachira noted that there is also a degree of international pressure for climate action. For example, ‘in most of Sub-Saharan Africa, the Global Reporting Initiative is the reference framework for sustainability reporting’. However, speakers agreed that these frameworks cannot be applied top down; there is work to do to understand how they are relevant in the local context. In Africa, this needs to reflect how social issues shape climate concerns. 

Prominence to the S and G of ESG 

While most African nations have introduced climate acts since 2015 which regulate the need to take climate action; regulatory and reporting frameworks targeting business are still in their infancy and vary significantly between countries in terms of scope and sophistication. The South African Regulatory Framework (FSCA) is the most developed. 

Since the mid-1990s, South Africa has focused on ensuring inclusion and black economic empowerment and this has shaped ESG reporting requirements, Wachira commented. Similarly, in Kenya financial inclusion is a big priority, while a history of corruption in Nigeria has resulted in a strong regulatory focus on good corporate governance. 

There is still significant debate about what are the right ESG metrics for companies to track and report. For Elwan Ibrahim, the focus on social impacts has complicated this somewhat. It can be relatively straightforward to demonstrate progress on some social issues compared with climate impact, e.g. the number of women on company boards. 

Maurice Radebe stressed the different pathway and pacing in the Global South where the ‘S’ in ESG is a priority because we must deal with extreme poverty and unemployment. The energy transition must be inclusive and not leave anyone behind. 

Okonedo and Wachira believe the absence of standard reporting requirements has increased opportunities for greenwashing; companies can report the metrics that show them in the most favourable light. Wachira also questioned whether these reporting metrics are truly embedded in the business and shape internal decision-making. 

Education and awareness 

There is a need for greater awareness and education among corporate boards of their climate responsibilities. Elwan Ibrahim stressed the importance of a practical approach that gives executives hands-on experience of critical issues, for example role-playing how the board would respond to an allegation of greenwashing. Sherwat highlights the BS4CL Africa partnership which is working with six top Business schools in Africa to advance corporate climate leadership across the continent. 

Ngubevana urged board members of African countries to familiarise themselves with the climate and sustainability obligations relevant to their organisation, both within their own country and also in other markets. There may be specific requirements that affect the organisation’s supply chain or export markets, he added. Radebe stressed that without this knowledge, board members would be unable to judge whether sustainability commitments proposed by the company management team are strategically aligned or, more importantly, realistic. 

Conclusion 

Pressure is mounting on African companies to take more action on climate change, particularly from the finance and investor community. Regional priorities mean that environmental issues are viewed through a social lens, while for companies there is an ongoing drive to improve corporate governance. Both factors are shaping reporting requirements. Company board directors need to quickly familiarise themselves with climate and sustainability issues to ensure that action is strategically aligned and that publicly-reported targets are realistic, measurable and genuinely drive business decision-making. 

Acknowledgements 

This summary is based on expert contributions to the International conference on ESG and Climate Governance from: 

• Sherwat Elwan Ibrahim, Associate Professor of Operations Management at The American University in Cairo 
• Lwazi Ngubevana, Director of the African Energy Leadership Centre at the University of Witwatersrand 
• Enase Okonedo, Vice-Chancellor of Pan-Atlantic University 
• Maurice Radebe, Adjunct Professor at the University of Witwatersrand 
• Mumbi Maria Wachira, Lecturer in Accounting at Strathmore University Business School 

1. African Union, Agenda 2063: The Africa we want, available at: https://au.int/en/agenda2063/overview ↩︎