Environmental Sustainability: From Abstract to Action Event Summary

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Environmental sustainability is non-negotiable. How organizations respond to climate change, how good they are with water management, and how they manage their supply chains, has a definitive impact on their reputation with customers, investors and other stakeholders.

On Wednesday, November 13, IsoMetrix hosted on of their popular breakfast seminars entitled “Environmental Sustainability: From abstract to action” at the Indaba Hotel in Fourways, Johannesburg.

Speaking at the conference were:

  • Stiaan Wandrag, Sustainability and external Reporting Director at Tiger Brands
  • Silvana Claassen, Senior Carbon Advisor, The Climate Neutral Group
  • Moroasereme Ntsoane, Managing Director at Nexus Sustainability

Stiaan Wandrag – Discussions on Environmental Sustainability

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Stiaan started his keynote address by asking the audience, “What do you do to minimize your impact on the environment?” He pointed out that 30% of food produced is wasted, of which 44% is fruit and veg.

Over the last few years, Environment, Social and Governance (ESG) has grown in influence. Stiaan pointed out that more boards and investment portfolios are mandating sustainability reporting. “But many use different methods to rate ESG performance,” he said.

“How do you operate with power interruptions and changing rainfall patterns that affect food production?” he asked. These are not hypothetical scenarios anymore, but rather a daily struggle for many organizations in South Africa. Stiaan points out that investors are asking these questions.

The world faces many complicated environmental issues. Our biodiversity is under threat. “If we lose the honeybee for example, we lose most of our food production,” he explained. Food security is directly impacted by climate change. Stiaan maintains that human behaviour caused the crisis, “But our behaviours make a difference! This is a crisis we can control, if we change our behaviour again.”

“Climate change is a reality and will affect South Africa in bigger ways than what we think,” he said. “SA has faster rising temperatures than anywhere else in the world. This is going to have a negative impact on us.”

When it comes to risk mapping and Environmental Impact Assessments, Stiaan questions whether organizations really understand the impact they have on the environment. He maintains that it is critical to have an embedded management system, how else do you accurately report on risk and the environment?

As a food producing company, Tiger Brands originally produced oats, “Oats in South Africa are imported from Australia because South Africa does not grow enough oats,” he said, and pointed out that Australia is suffering its worst drought in history, so oats are imported from Canada. “That’s quite a carbon footprint over breakfast.”

Stiaan is an advocate of digitization to manage environmental sustainability. “Digitize as much as you can,” he said. Use technology to capture information. It makes it easier for yourself and your auditors. Be brave in your digitization. Measure what matters. Never stop fighting to leave a legacy as a company that made a positive change to the environment!”

Stiaan closed his address by encouraging delegates to be honest in their reporting, as only by honestly addressing the issue could we hope for a resolution.

Silvana Claassen - How to Navigate mandatory greenhouse gas (GHG) reporting requirements

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“It has been two and a half years since the promulgation of the first climate change regulations in South Africa, including Carbon Tax,” said Silvana. The third deadline of 31 March 2019 looms.

“The planet is facing an increase in average temperatures, caused by anthropogenic GHG emissions,” she said. All countries in the world are bound to take measures to mitigate emissions as much as possible. “For South Africa this is especially relevant as the average temperature in SA increases four times as much as the global temperature.”

The South African government has proposed a mix of measures, including; carbon tax, carbon budgets, and energy efficiency tax incentives.

The National Greenhouse Gas Emission Reporting Regulations facilitates an administrative framework for the government to implement all its envisaged measures. These regulations were gazetted on 3 April 2017, together with the Technical Guidelines.

“I would like to touch on the challenges that have surfaced during the implementation of the Reporting Regulations since April 2017,” said Silvana. “Where does the reporting obligation lie within a complex organisational structure?”

Non-compliance can now also be picked up by The South African Revenue Service (SARS) come mid-2020, when SARS wants to collect carbon tax. However, Silvana maintains that the definitions and regulations are confusing for organizations: “How do companies establish whether or not the reporting requirements are applicable to them?”

Some of the key questions organizations need to ask themselves are:

- Do I have subsidiaries?

- Am I subsidiary to another holding company?

- Have I entered into joint ventures/partnerships?

- How many facilities do I have?

Moroasereme Ntsoane - Corporate Sustainability: Responding to the threat of Climate change Risks

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Moroasereme’s presentation addressed how businesses can make the transition to Sustainability Brand Leadership. “We have noticed that business has in general, started to embrace sustainability, as the new marketplace norm. And thus, organizations are grappling with crafting robust and credible, long-term business models and strategies for profit maximisation on the one hand, and mainstreaming of environmental and social sustainability, on the other,” he explained.

Hank Paulson, former US Treasury Secretary and Goldman Sachs boss said “The job of a CEO is far more difficult now than it was five or ten years ago, when it was exponentially harder than twenty years ago”. Moroasereme explains that this is because society has even more heightened expectations of business, to solve economic, social and environmental problems, as global multilateral institutions and governments seem to be failing. Any perceived failure by business is met with furious anger by society.

“But history tells us that Society has always harboured a disdain for business, despite its unquestionably immense contribution to human progress. And this trust deficit is not new, and is roughly coincides with cycles of anti-social behaviour.” Regardless of the now familiar severe consequences that are visited by society upon business transgressions, business does not appear ready to learn its lessons. “Corporate sustainability is grabbing mainstream attention, as the only credible response by the business sector to this changing business landscape.”

Stakeholders are beginning to re-evaluate their perception of what constitutes organisational value. The social licence to operate is always up for review, inside and outside the mining sector.

“But our experience is that mainstream attention to sustainability issues does not necessarily translate into mainstream action,” he said. This is not because businesses are not trying or disinterested. It is just that the leap from intelligence to intention is often non-trivial and downright daunting.

“Indeed we are living in a global crisis of complex and dynamic megatrends that are disrupting the business environment as we have come to know it,” said Moroasereme. “But as much as these Megatrends are introducing business risks, they are creating opportunities. They are transforming the competitive landscape and opening windows to business model and product innovation, which some leading businesses are exploiting.”

“Companies that are not embedding sustainability at the core of their business strategy today will no longer be relevant tomorrow. Companies who are, will be the successful leading brands of the next economy,” he argues.

Embedding Corporate Sustainability needs fearless and bold corporate leaders who are not afraid to challenge the very basis of their historical success, to pursue a future of corporate performance that delivers does not compromise the ability of future generation to live and flourish he concludes.

Robin Bolton - ESG Trends: A Global Perspective

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Robin presented a perspective on ESG as a growing global trend. “ESG refers to the environmental, social, and governance practices of an investment that may have a material impact on the performance of that investment,” he explained.

The integration of ESG factors is used to enhance traditional financial analysis by identifying potential risks and opportunities beyond technical valuations.

“But what is ESG and why is it receiving all this?” he asked.

While there is an overlay of social consciousness, the main objective of ESG valuation remains financial performance. ESG impacts are generally longer-term in nature, and in many cases, beyond the direct control of a company. Robin referred to a quote by Goldman Sachs: “If you ignore sustainability, you’re going to be worthless.”

“You can’t ignore ESG risks,” he says, “ESG factors are dominating the global risk landscape.”

The Top 10 global risks in terms of IMPACT are:

  1. Weapons of mass destruction
  2. Failure of climate-change mitigation and adaptation
  3. Extreme weather events
  4. Water crises
  5. Natural disasters
  6. Biodiversity loss and ecosystem collapse
  7. Cyber-attacks
  8. Critical information infrastructure breakdown
  9. Man-made environmental disasters
  10. Spread of infectious diseases

While the top 10 global risk in terms of LIKELIHOOD are:

  1. Extreme weather events
  2. Failure of climate-change mitigation and adaptation
  3. Natural disasters
  4. Data fraud or theft
  5. Cyber-attacks
  6. Man-made environmental disasters
  7. Large-scale involuntary migration
  8. Biodiversity loss and ecosystem collapse
  9. Water crises
  10. Asset bubbles in a major economy

Robin explains that there are several macro drivers of ESG:

External Factors

  • Multinational drivers (e.g. 2015 Paris Agreement on climate change)
  • Regional and other legal requirements (e.g. Mining Charter)
  • Increasing demands from stakeholders

Industry developments

  • A broader interpretation of fiduciary duty to include longer-term value drivers
  • Acknowledgement of materiality of ESG risk from high-profile investors
  • Growth of investor-driven ESG initiatives such as UNPRI* and TCFD** (other frameworks: SASB, GRI, IFC etc.)

The growing evidence of benefits

  • The positive correlation between ESG ratings and corporate performance
  • Strong ESG performance reducing capital costs and volatility
  • The negative financial impact of poor ESG performance

Robin explained that an ESG strategy needs to cater for both internal and external aspects:

  • Integrated thinking (break down silos)
  • CFO and CSO to collaborate
  • Focus on material risks and cost reduction (know your key ESG indicators)
  • Transparent reporting
  • Education and awareness

“Managing ESG risks unlocks value for organizations. It reduces consequences and builds a company’s brand,” he concluded.