Last week in this column, I talked about the importance of companies moving to integrated reporting where financial and non-financial information is shared so various stakeholders can engage with the company better on evaluation.
This week, we look at the importance and benefit of forward-thinking companies integrating their sustainability strategy as an integral part of good business management.
Companies have been engaging in corporate sustainability but as an exogeneous strategy that makes business sense for them to the extent of reducing reputational risk. But times have changed. Companies that take time to develop sustainability strategy by identifying all contextual factors then integrating them as core values will not only reduce their reputational risk but also create long term shareholder value.
While corporates used it to seek social legitimacy, there has been a tectonic shift where it has become an endogenous strategy to drive business management.
For example, Coca-Cola has made a pioneering commitment to replenish the water they use in their drinks and production and has made progress towards using water more efficiently and treat all wastewater in their production.
In the 2020 sustainability report, Coca-Cola reported that 100 percent of water used in finished beverages returned to nature and communities.
IKEA demands that its suppliers in India are prohibited from employing children and goes ahead to provide families with financial assistance to help keep their children out of the labour market.
For Royal Dutch Shell, it has the most ambitious green energy plan within the oil industry and is considered a climate leader after setting out the strategy of accelerating its transformation into a provider of net zero emissions energy products and services.
But last week there was a shift on the responsibility of corporate sustainability.
A Dutch court made a landmark ruling ordering Shell to drastically deepen its greenhouse emission cuts by 45 percent by 2030 with respect to the level of 2019 for the Shell group and the suppliers and customers of the group.
Now, Shell already has ambitious target of cutting carbon emissions of its product by at least six percent by 2023, by 45 percent by 2035 and by 100 percent by 2050 from its 2016 levels.
But that the court found the strategy wanting ideally communicated two things. First is that corporate sustainability strategy is not only an endogenous strategy to be inculcated in the company’s core values but a company has to be alive to its social expectation and responsibility.
Second, corporate sustainability is not also an internal, voluntary and market-driven strategy but a social responsibility that can be enforced by exogenous players who feel that a company is not handling its fair share of responsibility.
So, as local corporates release their sustainability reports at this time, they should be strategically keen to communicate specific, measurable and time-bound sustainability goals.
In its latest integrated report, Safaricom says that intends to be carbon-neutral by 2050 and aims to achieve 74 percent overall reduction in emission by 2050 with the remainder to be offset through various initiatives.
One of the implemented strategies has been to reduce size of SIM card as one of the strategies effectively halving the amount of plastic used in their production and delivery cost saving.
For a financial institution, green financing is one of the sustainable strategies and in the KCB Group integrated report, in November 2020 it became the first bank in the region to receive Green Climate Fund accreditation, paving the way for lending to medium and large climate-resilient assets and projects valued at between $50-250 million.
Now, currently with the Covid-19 pandemic, stakeholders will be keen to see corporates post-Covid sustainability strategy alive to the current challenge.
How are corporates impacting the community during this pandemic period?