Summary
Professor Enase Okonedo, from Pan-Atlantic University, discussed the varying levels of ESG (Environmental, Social, Governance) awareness and implementation in Africa. Despite Africa’s vulnerability to climate change, local progress has been held back by economic development concerns and the region’s reliance on extractive industries. Recent progress has been driven by financial pressure, though ESG efforts lack a unified approach and there is a need for ESG standards to be adapted to regional and local contexts.
Key Takeaways
- ESG topics have yet to gain prominence within African boardrooms. They are still widely considered a cost to the business, in contrast to developed regions where sustainability and climate action is increasingly seen as a strategic differentiator. There is an emerging tendency for companies to address ESG concerns in response to investor pressure.
- Addressing Africa’s social challenges and climate change requires a balanced approach. There is a close link between climate action and social responsibility. Striking the right balance, whilst also driving economic development, is a challenge for the region. For instance, a transition towards renewable energy, such as wind power, may result in increased deforestation.
- In Africa, “the [ESG] focus should be on ‘S’ and ‘G’”. ESG metrics and measures need to be adapted to local contexts, ensuring that they effectively capture the unique circumstances and challenges faced by different countries and industries.
- Smaller African businesses show ESG progress due to growth aspirations and investor demands. Small businesses need to attract external funding, and investor interest emphasises progress on ESG issues, as international financial institutions generally require ESG to be integrated into the business strategy. This is significant in Africa, where over 80% of businesses are SMEs.
Conclusion
Regional challenges mean that ESG standards and metrics need to be tailored to the local context. In Africa, this involves balancing economic growth with environmental preservation and social development. Although ESG tends not to be a top priority in the boardroom, investor expectations are driving it forward in Africa, especially for SMEs looking to attract international funding and pursue growth opportunities.
Links
Prof. Enase Okonedo – Pan-Atlantic University (pau.edu.ng)
Board Composition and Diversity in Developing and Emerging Markets | 2 (taylorfrancis.com)
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