Africa is a hotbed for technological development and innovation. Africa has some of the fastest-growing industries across the globe. Businesses in every region of the continent are collaborating and partnering to build solutions that have the power to change the lives of millions of people. But for many international investors, Africa still poses a risk.
Several companies in Africa are proliferating, but their efforts towards the environmental, social, and governance (ESG) framework have not developed at quite the same pace. Business models and strategies have yet to implement sustainable growth values to ensure the security of global investors and the empowerment of future generations.
What is Environmental, Social and Governance (ESG)?
ESG refers to Environmental, Social and Governance, the three central factors for a business’s functions that socially conscious investors use to screen potential investees. These factors affect how a company will attract funding from global investors who have a ’socially responsible’ investment strategy.
- Environmental criteria explore how a company contributes to solving environmental challenges (e.g. air and water pollution, waste, deforestation, global warming and climate changes).
- Social criteria examine how a company treats people and customers (e.g. human resource management, labour standards, equal opportunities, work environment, health & safety, and customer responsibility)
- Governance criteria look at how a company operates (e.g. tax transparency, shareholder rights, anti-corruption and anti-bribery policies, and risk management).
As investors focus more on values like environmental protection and sustainable development, adopting the ESG framework by businesses can lead to better investment opportunities and create value for their stakeholders. These financial benefits can motivate businesses to pursue high ESG performance. At a higher level, better adoption of ESG can also contribute to Africa’s growth and development.
Benefits of ESG in Africa
Socio-economic growth
Africa being is a fast-moving developing region but still suffers from extreme poverty. Many public reports suggest that 1 out of every 3 people living below the poverty line is from Africa. ESG can accelerate inclusive socio-economic growth as businesses would be more heedful of their workforce, customers, stakeholders, and people directly or indirectly related to their work.
Better utilization of resources
Africa is rich in natural resources. Every country has something to offer, be it natural resources or human capital. However, effectively utilizing resources has always remained a challenge. Adopting the ESG framework by businesses would enable them to use resources in an effective way. Moreover, they will be motivated to treat their employees better and maintain labour standards.
Centre of global investments
Incorporating the ESG framework can attract a lot of investments from ‘socially conscious’ investors around the world. This can make Africa a hub of global investment in many industries. Furthermore, it can also lead to more job opportunities, better living standards, reduced poverty and much more.
Innovation
Motivated businesses plus global investment opportunities generated from ESG can dramatically boost innovation in the continent.
Conclusion
Africa has a long way to go in terms of achieving optimum utilization of resources, sustainable way growth, and developing business models that recognize the value of its workforce. As investors today look for sustainable investments, they aim to identify substantial, comparable, data-driven indications in order to make investment decisions.
At Wakandi, we aim to keep ESG very high on our corporate agenda. We understand that achieving sustainable growth and development, particularly in a time of resource constraints and external pressures, requires constant efforts. That said, we are working hard to achieve better growth and innovation, focusing on fundamental principles of environmental, social, and governance provisions.