By Denene Erasmus

Companies in Southern Africa, as elsewhere in the world, are facing growing pressure to transition to more sustainable and inclusive business models. Now in its second year, the 2024 edition of the Sanlam ESG Barometer in partnership with Business Day provides a window into how companies in South Africa and Kenya are thinking about ESG integration by not only reviewing what companies are doing to enhance sustainability, but also why they choose certain actions.

The most significant change to the report, said Cecilia Schultz, ESG Barometer project manager; senior analyst at Krutham’s (formerly Intellidex) capital markets practice, compared to last year’s inaugural edition is the inclusion of Kenyan listed companies in the survey.

“While we are still some distance from our ambition of producing a comprehensive African account of ESG adoption and experiences, this marks an important step towards a more regional perspective.

“Expanding the geographical scope also allows us to capture a more nuanced understanding of ESG practices and challenges within both Kenya and South Africa, offering comparative insights that highlight commonalities and regional differences,” said Schultz.

This edition, she said, also delves deeper into how companies are aligning their ESG strategies with the United Nations Sustainable Development Goals (SDGs) as the 2030 deadline nears.

“We are particularly focused on assessing the depth of company engagement with the SDGs, examining the specificity with which companies target sub-goals and indicators, and how these efforts are reported.”

Additionally, the 2024 Sanlam ESG Barometer, due to be launched in the first week of August at the Sanlam ESG Barometer Conference, examines in greater detail how global ESG trends are influencing local adoption and shaping corporate and investor attitudes towards sustainability.

One of the main themes emerging from the 2024 survey is the rising significance of ESG considerations among not only companies in South Africa and Kenya but also regulators and civil societies across the continent, said Schultz.

This was not only evident in this year’s research, but can also be seen in a surge of ESG-related litigation in Africa in recent years.

Legal actions, such as the case against Shell in Nigeria involving a recent oil spill, show increasing engagement from local communities and NGOs in holding companies and governments accountable for environmental and social issues.

“There is a growing demand for those in power to ensure a more sustainable, climate-resilient future,” said Schultz.

Another emerging theme is the growing recognition that ESG is crucial for operational stability. “While many companies still adopt ESG strategies primarily to attract capital, financial benefits are no longer the sole reason. Most companies have active ESG engagement strategies with entities in their value chain to ensure the sustainability of their operations,” she said.

More than 800 people have already registered to attend the Sanlam ESG Barometer Conference virtually on August 1 in Johannesburg.

The conference will delve into some of the key findings from the survey, including the similarities and differences between South African and Kenyan companies’ approach to ESG, the role of investors in the design of ESG strategies, and the key considerations to assess when examining ESG integration in hard-to-abate sectors.

The Sanlam ESG Barometer presents more than just a retrospective look at what has happened. Rather, it presents a detailed picture of how companies are thinking about ESG, said Schultz.

“Understanding the motivations behind ESG integration provides us with a unique perspective in the form of a rare behind-the-scenes look at not just what these companies are working on today, but also how they are thinking about and planning for tomorrow.”

These findings are useful for listed companies in terms of assessing how their approaches align with regional market trends and how they compare to their peers.